When you and your REALTOR® sit down to price your home, you’ll typically review comparable homes that are the most similar in size, location and amenities as your home. You may find that prices can be thousands of dollars apart. It’s tempting to pick the highest price and say, “Let’s list it here.” But what if your home doesn’t sell at that price?
High prices are a strategy that can work in an accelerating market, but it’s risky. Your home could sit for months without selling and you could end up needing to lower your asking price, perhaps lower than it might have sold for in the first place.
Pricing your home is a science. The science is choosing the right price at which your home will sell quickly. How do you do that? By analyzing your local market conditions and where your home fits in the spectrum.
The only way your home will sell at any price is if a buyer agrees to purchase it. To best determine market value, you have three important tools: CMAs, appraisals, and your REALTOR’s® knowledge of the market.
The comparative market analysis
A comparative market analysis (CMA) is a side-by-side comparison of similar homes for sale as well as homes that have recently sold in your neighborhood. REALTORS®use CMAs to compare the features that make each home unique, including age, location, number of bedrooms, baths, room sizes, updates, condition, etc.
As a seller, you should be able to see where your home fits — in the top or lower price range of similar homes. For example, if a similar home to yours has been recently renovated with a new kitchen, expect it to sell for more than your home if your home has not been improved.
An appraisal is a market analysis performed by a professional appraiser using a variety of sources, including multiple listing system data and conforming loan formulas.
Appraisers most often work for lenders to determine market values, so that lenders can weigh the risk of making a loan to a homebuyer. Appraisals come after an offer is made when the buyer applies for a loan. Even though the buyer pays for the appraisal, the lender uses it to determine whether or not to make the loan at the contract price.
Other market data
Your REALTOR® may have access to data that may not be public through the Multiple Listing Service. This data is provided to broker members to track market trends over weeks, months and years. Some brokers pay data companies for specific markets that help them plan their business, such as the number of listings on hand, which zip codes are the hottest, and whether closings are trending up or down over last month or last year.
Your REALTOR® uses all this data to help you hit the sweet spot of pricing. One that’s high enough to reflect your home’s value, but attractive enough to buyers to get it sold quickly.
Written by Blanche Evans