Home Pricing Tips: How to Ensure Your Home is Priced Accurately
One of the hardest things about selling your house is making sure you are asking the right price. Though it may seem like a fine idea to start high and lower the price as you go, experienced real estate agents know that correctly priced homes actually sell for more than ones that have been repeatedly reduced.
Accurate home pricing can become difficult due to the many factors contributing to the final listing number. Here are some of the main factors that will determine the sales price of your home.
Comparative Market Analysis
The first step in setting the price is to understand what other houses in your area are selling for. This is done by studying comparable homes, or "comps." It's a good idea to look at all the houses listed for sale within a half-mile radius of your home. Look closely at the ones that are about the same size—typically within 10 percent of your home's square footage. Other factors should be similar, if possible, including the age of the house and the size of the lot. Take a look at both the original asking prices and the actual sales prices to see what people are willing to pay.
Other Home Pricing Factors
If you're thinking you'll never find a "comp" that's exactly like your house, you're absolutely right. Pricing your home requires you to analyze what's better about your house than the competition—and what's worse. This is hard to do when you're emotionally attached to your place, which is why hiring an experienced and knowledgeable agent is crucial to eliminate your bias. Some factors that should be considered are:
- The Location: A busy street, power lines, and unattractive neighboring properties can all bring down the price of your home, while things like parks, bike trails, and other neighborhood amenities can boost the price. Knowing how buyers feel about your neighborhood is crucial to properly accessing the asking price.
- The Schools: The quality and reputation of the local schools plays a major role in pricing a home, with more than half of home buyers with children under 18 citing school districts as a major factor in their decision-making. Buyers are willing to pay a premium to get their kids into quality school districts, so analyze their ratings and reputations carefully.
- Recent Renovations: If you've upgraded the kitchen or bathroom recently, replaced the furnace, or put on a new roof, you might be able to command a higher price. Likewise, a house that doesn't look its best or is in "fixer-upper" condition will be priced lower. Minor factors that can affect the price in this area include whether alterations were permitted and whether you have receipts for the work.
- The Tax Assessment: If you live in an area with very high property taxes, you may need to lower your price slightly, especially if nearby communities have lower tax burdens. Buyers build their budgets based on the total monthly payment, and high taxes could put your home out of reach if there's competition elsewhere.
Common Home Pricing Methods
Once you've done your research and have taken your home's unique conditions into account, you can begin to build your price. Many people do this by listing a price per square foot. With this method, you can calculate the price per square foot of several comps, then multiply the average by your home's square footage. This method provides a rough valuation, but may not accurately take into account things that make your home special.
It's also possible to use the tax assessment as a starting point for an asking price. Be cautious with this approach, however: Your latest assessment may have been years ago, so it may be outdated. This is also true for appraisals conducted for a refinanced mortgage. They quickly fall out of date, and they are often a bit inflated by lenders who want to give you a bigger home equity line or cash-out value.
Confused? Call a Real Estate Agent!
As you can see, there's a head-spinning amount of information that goes into pricing your home. The best way to make sure your home is priced correctly is to trust an experienced agent to do the market analysis for you. Look for someone who specializes in selling homes in your area, and ask how they determine the price. You'll know they're doing it right when they explain their thinking about all of the factors listed here. Home pricing is both art and science, so finding an agent you trust with local expertise is absolutely worth it.