Selling Your Home - Part 4

My home is worth more than that...

We were scheduled to talk about the "hammer and nails" of putting your house in order to get it on the market and sold. However, we believe you have enough information in the previous 3 posts to get this done. Instead we are going to address what is probably most important and crucial decision to get your home sold...and that is pricing your home.

By far, as Realtors, the most discussed (and argued) point in the getting the home sold is the pricing. The sellers believe their home is worth "x", the buyers believe it is worth "y" and the Realtor says it worth "z". Who is correct? The answer is none of the above, because all of these are guesses.  The Realtor estimate is the best, since it is backed by market data. However, the final selling price of your home will not be determined by one person, it will be subject to that thing we call "The Market". The trick is to pick an asking price (listing price) that will allow you, the seller, and the buyer to negotiate a price acceptable to both parties.

Before moving forward we should separate the difference between price and value. One way to look at this is the use of your car. You paid a predetermined price for your car. The price being what you were willing to pay the dealer for the car. The car is now of value to you, since it provides you with dependable transportation. You could have gotten the same value from any car, but you chose to pay the price for this particular model. The same with your home.  It has functional and sentimental value and you also have a perceived monetary value. But, its not the value, its the price.

With this being said, let's go through the steps of how a Realtor determines the asking price of your home.

The Competitive Market Analysis

Your Realtor has access to a lot of market data. It is with this data that we (the Realtors) construct a Competitive Market Analysis (CMA) of your property. This analysis takes into consideration:

1. The sales of homes similar to yours in the same neighborhood within the last 30, 60, 90 and 180 days depending on sales activity.
2. The current asking prices of active listings in your neighborhood of similar homes.
3. The turn over rate in your neighborhood. How long, on average, does a similar home stay on the market before receiving an accepted offer.
4. The Listing Price to Sales Price ratio. What is the average difference between the asking price and the selling price of homes recently sold in your neighborhood.
5. What additional upgrades and features have you added to your home. Such as, finishing the basement, upgrading the kitchen and/or baths.
6. What is the current rate of appreciation or depreciation over the last year for overall home prices in your area.
7. Let's not forget Location, Location, Location. Access to good schools, shopping, worship centers, traffic patterns, noise...all factor into what a buyer is willing to pay for the home.

The Realtor takes all this into consideration and develops a likely range for pricing your home. The excellent Realtor (like us) will have this data digested into a very understandable and readable report (the CMA). You will now be equipped with the data you need to understand why the Realtor is recommending a certain listing price. If your Realtor has done the CMA report properly, using the most current data and knowledge of the market, this is by far your best indicator of the price your home will fetch in the market.

Market Conditions

You may have heard the terms "Buyer's Market" and "Seller's Market". These have to do with market conditions.  They are directly related to the pricing of your home with respect to the time it will take for it to sell. Here's how it works:

The Real Estate Market has an existing inventory of homes available to sell and the inventory turns over at a certain rate, either slow or fast. The kind of market you are in then depends on speed of the turnover.

In a Buyer's Market the amount of available inventory is high. Many homes are on the market. This results in:

1. Buyers can be very selective on which home they want to buy.
2. The selection process causes the time on the market to lengthen.
3. Home prices are driven down due to lack of competition.

The opposite happens in the Seller's Market. Inventories are low, which results in:

1. There are more buyers than available homes.
2. Sellers have upper hand in purchase negotiations. Thus prices increase.
3. Time on market is shortened, which adds to Seller's Market with fast inventory turnover.

There are several formulas (mostly depending on location) that tell you what market you are in. One rule of thumb is a Seller's Market will turnover 80% of the available inventory every 3 months. The Buyer's Market will turnover only 20% of the available inventory every 3 months. Regardless on how it is calculated, your Realtor (that's us) will be able give you the answer for your local market. Knowing which market you are in is going to have much to do with the pricing of your home.

Conclusion

We hope you are now able to understand the process and experience it takes to predict the price of your home. The market data rules the day and it is what it is.

As we said in a previous post. When you put your home on the market for sale it is no longer your home. It is hard, but you have to get emotion out of the way. If you try to let your emotion (and pride) choose the price of your home instead of listening to the professional, you are on the road to disappointment. Please always keep in mind that, as a Realtor, it is our duty to make sure you receive the highest and best price for your home. In Part 1 you chose the right Realtor. Let us do our job and it will be a Win/Win for all.

...and you can take that to the bank!