Incorrect home pricing can be detrimental for a homeowner as well as the entire neighborhood. It is important to properly price a home for a quick sale.
Importance of Home Pricing
Many people assume that if the sale price of a property is too high, potential buyers will simply offer a lower price. Unfortunately, that is not always the case. A house that is priced too high might not even attract the attention of a potential buyer for the simple reason that, well, the price is too high. People looking to buy homes often look only within their price range and will ignore houses outside that range.
While a home that is priced too low will sometimes sell quickly, this can not only cause a loss of money for the seller but could also decrease home values within that neighborhood.
Research Area Home Prices
It is important to do a significant amount of research prior to arriving at a fair market price for a house. A real estate professional will discuss the following information when presenting a comparative market analysis.
First, it is important to look at similar homes that are currently for sale within a five to ten-mile radius of the home that is to be sold. Similar homes refers to houses that are the same style, such as ranch or two story, as well as houses that have similar square footage and number of bedrooms.
Knowing the housing market competition is important when selling a house. If possible, visit homes for sale during Realtor’s open houses or check for online pictures and visual tours. This will provide a more accurate view of the positive and negative aspects of the competition.
Next, a market analysis will provide information on all homes in the area that have sold in the past three to six months. This information is especially important for both buyers and sellers. Recent home sales are an important part of what appraisers use when performing a home appraisal. Most banks or loan institutions require a home appraisal as part of the lending process. If a home does not appraise at the value it is being sold for, a mortgage may be denied for that home.
With all the research gathered, it’s time to come up with a selling price. If the house next door is exactly the same square footage with the same floor plan and sold last week, chances are good that the selling price should be the same. Usually this is not the case, and pricing adjustments must be made.
Pricing adjustments are necessary when the house being sold has a different number of bedrooms, bathrooms, garages, or square footage from the house it is being compared with. For example, if the house at 123 Birch Street had four bedrooms and two bathrooms, no garage and less than an acre of land and sold for $100,000 one month ago, how much would a similar style three bedroom house in the same neighborhood sell for? The obvious answer is that the three bedroom house should sell for less, but how much less is an important distinction.
Find A Home Sale Price
Checking house assessments might give an idea of the value of a bedroom, garage or extra bathroom, but in the end, a real estate professional is the best person for that kind of advice. Real estate professionals have easy access to pricing information such as the exact value of an extra bedroom or bathroom for a particular area.
Remember, the condition of any house is an important consideration when determining a selling price. Be sure that the property is in pristine condition before attaching a high price tag.
It is important to note that although there are online public databases that provide sales and housing information, it is not always a good idea to utilize these when determining a selling price. Many of these databases have incorrect or outdated information.
Real Estate Professional
A real estate professional with a number of years of experience can help with home pricing. Call several agents and make appointments for comparative market analysis. Although this may take hours of time, it is worth the effort in the long run. Malcolm Smarts of Agency, says, “Proper pricing is always crucial. It doesn’t matter what a house sold for last year, or what a neighbor’s house sold for. In certain markets, banks are going to require appraisers to only look at what has sold in the past three months. As technology continues to advance, Realtors® are starting to have access to a wide number of databases and products that give greater accuracy to pricing a home.”
While it is important to understand how to arrive at a fair market price for a home, a real estate professional can help streamline this process. Pricing a home too high or too low can have a negative impact on not just personal finances but also a community’s finances.