Pricing Your House for Sale

The single most important factor to consider when selling your home is the price, because you're communicating to buyers what you believe your house is worth. Pricing is all about supply and demand, it's part art and science. You should also know that no two Realtors will approach home pricing the same way. I encourage my clients to interview other Realtors, requesting a Comparative Market Analysis (CMA) from them, in order to gather as much information as possible. It also gives you the opportunity to sense if you will be able to work with the Realtor.

A CMA is an informal assessment of a property's market value, usually done to establish a reasonable listing price when a property is placed for sale. The price is established by comparing the property to similar properties that have sold in the area within the past six months. The subject property is also compared to houses that are active as well as pending or expired. A properly prepared CMA can be a useful tool for buyers and homeowners as well. Buyers can use a CMA to determine an offer price, and homeowners can use a CMA to help dispute tax assessments.

If you overprice your house, savvy homebuyers will pass you by, as will Realtors, because in today's market people are doing their homework. Further, if your home is over priced you will lose the "freshness factor" of your home's appeal after the first two or three weeks of showings. After three weeks homebuyers begin to make a host of assumptions about your house, none of which may be true, but all of which will impact the sale ability of your home. A couple assumptions that most homebuyers and Realtors make about old listings are: It is over priced, or, something is wrong with the property. To protect yourself from either of these assumptions about your home it is important to work with a Real Estate professional that understands the market, and one that does her homework.

If you're concerned about pricing your house for sale below market value, consider this; oftentimes homes priced below market value will often receive multiple offers, which will then drive up the price to market.

As mentioned earlier, in most cases, if you ask three different Realtors to suggest a price for your home you will get three different prices. You, as the seller though should consider the type of market you're in, in relation to setting the price. For comparison purposes, imagine that the last three comparable sales in your neighborhood were $350,000.

In a buyer's market, your sales price might allow some wiggle room for negotiating, but be close enough (near the last comparable sale) to lure a buyer to tour your home. To sell in this market, you might need to price your home at $349,900, and settle for $345,000.00.

In a seller's market you might want to add 10% more to the last comparable sale. When there is less inventory and more buyers, you can reasonably ask more than the last comparable sale and likely get it.

In a balanced or neutral market, you may consider setting your price at the last comparable sale and then adjust for the market trend. For example, if the last sale closed three months ago, but the median price has edged upwards of 1% per month, pricing at $355,000 would be reasonable.

What is a seller to do if he's purchased a home and spent thousands of dollars on improvements and upgrades, to only discover that now he has the most expensive house in the neighborhood? This is an unfortunate and costly mistake and quite often newbie's to real estate investing find themselves in this quandary. You really only have two options, either take a loss on the sale of the property, or attempt to lease it long enough in order to cover your monthly payments, and wait out a turn in the market.

 In the next issue look for my Buyer Beware article.