When selling your home, there are many factors that affect the fair market value of your home. Location, size, condition, features, amenities, improvements, market conditions, interest rates, and economic conditions all combine to determine the value of your home.
Important Tips to follow when setting or determining the selling price
Pricing your home requires some objectivity. As a seller, you may have a value that you feel you should get for your home when you are ready to sell. You should keep in mind that your value of the home versus what a buyer is willing to pay for it could be a lot different.
A few factors that do not have an effect in establishing fair market value are: How much you paid for the home, how much money you need for a down payment on your next home, your mortgage balance, or how much time and money you have invested in improvements.
A buyer is going to make their decision based on how much a home is worth to them. They typically won’t pay more for one home, if there is a similar home for sale with the same characteristics and in similar condition for a lower price.
Contact at least three local real estate agents to view your home, and provide you with a Comparable Market Analysis (CMA). A CMA will look at similar homes on the market in your area, those homes that are currently pending sales, comparable homes that have recently sold, and homes that were on the market that did not sell. Looking at similar homes that are currently on the market will provide you with an idea of what your competition is. Pending sales are those listings that currently went under contract. Normally, you are not able to obtain information as to the sales price or concessions paid. They will give you a good idea of where the market is. Homes that have sold in the past 6 months, in your area, are the comparable sales. The sales price of these homes will help determine the market value of your home. Also, these are the sales that an appraiser will use when creating an appraisal for the buyer. Finally, a CMA will contain homes that have ‘expired’ or that are no longer listed. Generally, these homes were unreasonably priced and did not sell for that specific reason.
When viewing comparable sales, try to determine what the price per square foot is. You can get an idea of where to start with pricing your home. The price per square foot increases as the size of the home decreases, and visa versa. This should not be the only tool used in pricing your home, though it will give you a good starting point.
Attend open houses in the area to get an idea of what your competition looks like. What type of amenities do these homes have? What is the condition of these homes? If you were a buyer, which home would you purchase and why? By viewing the competition, you can gain insight into any repairs or improvements you can to make on your home.
What type of market is your area currently experiencing? Are we experiencing a buyers market, or a sellers market? In a buyers market, there are more sellers than buyers. Therefore, prices decrease due to the excess of supply over demand. On the other hand, in a sellers market, prices increase due to the high demand and low supply. Are prices in your area rising or decreasing?
Also, look at current economic conditions. Is your local job market strong or soft? How are interest rates?
All these factors play a role in the pricing of your home. Working with a local real estate agent can help you to price your home correctly the first time.