Market value and the science behind pricing your home
a) Pricing roles
Seller sets Price
Buyer determines Value
Lender validates Value
It is important to understand the different roles that the parties play in pricing your home. You, as the seller, set the price of your home. However, the buyer determines the value by stating how much he is willing to pay. And then, in most cases, there is a loan involved and the Lender validates the value to be sure that they are not loaning more than the property is worth. My role is to present you with objective facts about what has sold in the marketplace and to help you understand how your home compares to them. It’s your role to set the price at a fair market value. The real question you should ask then becomes…..how do I get more qualified buyers to look at my home and what is the real market price of my home?
b) Factors That Affect Value
There are a number of different factors that affect value. The comparable sales show what have actually sold recently near your home. These are facts and are given the most weight in determining a price. The number of homes that are currently on the market can also affect value. If the demand is high and the supply is low, the price can go up. If the demand is low and the supply is high, the price can go down. It is just basic economics.
If mortgage money is in short supply or priced high, it reduces the number of people who can consider your home, which will lengthen the time it is on the market and ultimately affect value.
If the general economy is good, people will fee “good” about buying a home. If there are favorable terms, people will be willing to pay more.
c) Factors That Don’t Affect Value
However, there are some things that just don’t affect value at all. For instance, what you paid for the home is irrelevant to today’s market. Just because you might have overpaid for a home doesn’t mean that the new buyer will to. The market conditions may have changed.
You may have invested in certain types of improvements for our own personal enjoyment that has little or no value to the buyer. Sometimes, an owner will make improvements with the highest of quality items that are not justified by the price of the home in a particular neighborhoods. They just won’t increase the value.
d) Don’t Get Caught Saying This…
Selling a home is an emotional exercise. Don’t get caught saying things like this in order to try and get more money for your home: “Another agent said it was worth more” - they have to look at the same comparable we are, how can they justify it with facts?
“Our home is nicer than those houses” – this is a very subjective statement. Most owners always think their home is nicer than the others. Let’s go together and check out the best comparable homes for ourselves!
“People always offer less than asking” – By overpricing a home, you actually encourage people to make a lower offer.
“We can always come down on price” –
Once a home has been on the market for a while, the public as well as the agents start thinking that something is wrong with it.
“We have to get that much out of it” – Your need for more money is a personal thing and you can’t expect a stranger to want to help you by overpaying for your home.
“We paid more than that for our home.” – It is unfortunate when the market goes down but it does happen. Can you wait years for it to come back up again?
e) Obstacles to Proper Pricing
There are obstacles to proper pricing that need to be avoided if at all possible. There are agents who will accept a listing at any price and then, after you become disappointed that it hasn’t sold, solicit a price reduction. There are neighbors who intentionally mislead other neighbors by letting them think they sold their home for what they were asking for it.
Fear of making the mistake of selling too low will also cause a person to pricing a home too high. They know that if it sells for that price it would be good but they just aren’t certain what the “right” price should be.
We’ve seen sellers who lose the proper prospective because they are emotionally involved and cannot approach the task logically.
No matter how legitimate the need to realize a certain amount from the sale, it will not justify overpricing a home.
Price your house intelligently, maintain good curb appeal, give it “wow” inside look and you are on your way to “SOLD”