Pricing Your Home
General Rules of Pricing
The value of a home can be determined by multiplying the current market price per square foot by the property’s square footage. Your current market price per square foot will be dictated by homes near yours that are similar in size, condition and amenities. It’s generally quite easy to compare newer homes as they tend to be more similar. With an older home, values can vary greatly dependent on updates, general upkeep and renovations.
Your property price is affected by the homes that surround it- if your home is quite large for the neighborhood, your property’s value will be reduced. If your home is considerably smaller than most other homes in the area, the value is likely to increase.
Common Home Features – Do They Add Value?
First-Rate Lots – Yes, your property value will be increased by these desirable lots. Determine what your home value will be without the lot, and then add the value of the lot to the market value of the home.
Swimming Pools – While pools will add some value ($10,000 to $15,000 at the most) they will not come close to adding what they cost to install. Account only for what they’re worth, not what you spent on the pool.
Enclosed Garages – No, garages that have been remodeled to function as living space will not add value to your property. You’ve lost a garage and gained some living space, and the pricing variations will cancel each other out. Deduct the square footage of the converted space from your total property square footage and multiply by the market value per square foot to obtain your home price.
What if the Market Value Isn’t Enough to Cover My Mortgage?
This situation occurs quite frequently. If you have followed the general pricing rules and you’re confident that what your home is realistically worth will not cover what it would cost to sell the home – remaining mortgage, real estate commissions and fees and closing costs – then consider a short sale solution. For more short sale information, see our short sale guide.
Pricing Games – Avoid the Chaos
- You will easily be able to determine if your home is priced correctly once it’s on the market- if you aren’t getting showings or offers, your home is priced too high, assuming you’ve got good pictures on your flat fee MLS listing and you’re not making it difficult for buyer’s agents to show the property.
- To increase showings and offers, lower the price of your home.
- A home will sell for full price only if it’s worth full price.
- While a buyer’s agent may not present you will a full price offer initially, this doesn’t mean the buyer isn’t willing to pay full price.
- Avoid offering buyer incentives – you’ll get more showings by simply lowering the price by the amount you were willing to offer in incentives.
- A home is most likely to sell for full price within the first 2 weeks of a listing since a buyer might fear the home being sold to someone who offers full price.
- If you overprice your home and a buyer agrees to purchase it for an inflated price, be aware that an appraisal could ruin the deal – a bank won’t lend money for a property that doesn’t appraise for the mortgaged amount.
- If your home isn’t selling, reduce the price. If a property hasn’t been sold within 3-4 months, and the seller hasn’t reduced the price, most potential buyers will think there’s an issue with the property or that you’re not serious about selling.
- Always offer the standard 3% buyer’s agent commission. Offering more is unnecessary and offering less will ensure that agents may steer clients in another direction, telling them that the property is unavailable.
Values of New vs. Existing Homes
If your home was built within the last three years, know that it has not yet started to appreciate. In fact, much like a new car, there has probably been some depreciation. This is because in new neighborhoods, you will not only be competing against other sellers when your home is on the market, but you’re also competing against your builder.
If people are given the option of purchasing a brand new home where they get to select colors, upgrades, finishes and more, they’ll certainly not purchase your home for the same or more money. You’ll need to reduce your property’s price by 5-10% to compete with the builder’s prices.
Very simply, if you are purchasing a home for a short time period, purchase an older home. If you’re planning to live in your home for a long while, purchase a newer home.
Professional Pricing Options:
Comparative Market Analysis by Flat Fee Broker. This option is preferred if you want to avoid paying a professional appraiser, but still value an unbiased opinion. With no vested interest in altering comps in your CMA, know that we’ll give you the most accurate suggestion we can. Remember that newer homes are much easier to value due to similarity to other properties in the area, and older homes are significantly harder to value due to variable condition, remodels, and repairs.
Realtor CMAs. Just as we can, Realtors can pull CMA data for your review. Be very conscious that most will have their own agenda when offering you these numbers. Some might under-value your property, hoping for a very quick and easy sale. Another will over-value your home, hoping to please you. Take all advice with a grain of salt.
Pay for a professional appraisal. By far the most reliable option, especially if you are in an older home. If you are quite uncertain about your home value, this could be a good investment (typically $300-$400, depending on your area) when you take into account any money you might be leaving on the table, or time you might waste when asking for too much money.
Price IS the Most Important Factor in Selling Your Home
Anyone who tells you that your home isn’t priced too high when you haven’t had any offers after your home has been on the market for six weeks or so is lying to you. Very simple rules follow:
- If you’re not getting many showings and/or offers, your price is too high, assuming that you have good photos on your listing and you’re not making it difficult to schedule showings. There are NO EXCEPTIONS.
- If you’re getting a lot of showings but no offers, there is something wrong with your home that people can’t see until they come for a showing (examples: strong odors- pet or smoke, really odd floor plan, excessive and obvious need for repairs.)
- If many showings have been scheduled, but they don’t bother coming inside to see the property, there is an external challenge (examples: really busy street, unattractive power lines, properties in disrepair close to yours, obviously noise issues – highway behind house, air traffic, close proximity to mass transit.)
Again, price is and always be the most important aspect in selling your home. Buyers have “told” you if they don’t like your home with their lack of showings and/ or offers. You must choose to respond by lowering your price if you want to sell your home.