Pricing Your Home
HAPPY NEW YEAR!
I know it's been very cold outside lately and NO ONE wants to move in the winter BUT... if you want to make a move before summer starts then now is the time to contact an agent! It takes time to have your property evaluated, make a marketing plan, and decide if now is the right time to move. If you wait until the weather warms up you might be rushed into a decision and no one likes being rushed.
Pricing a home can be very tricky. It’s YOUR home, full of memories, hopes and dreams which can make the pricing game even harder. Your house is always going to be better than your neighbors because it’s YOURS. It’s the basic human condition and unfortunately it can lead us to make bad pricing decisions. There are consequences for pricing your home incorrectly; too high and your home could sit on the market for months longer than normal, costing you money, too low and you could jip yourself out of money that you need for your next step in life.
That's why I'm here to guide you through this important decision. Below are tips and tricks that you should keep in mind when pricing your home. Please remember that as your Realtor® I work for you. You’re the boss, so you set the price, but it’s my job to look out for your best interests. You might not agree with what I tell you but I’m still going to tell you, whether or not you want to hear it.
With that being said, read on for pricing tips. Or just call me today!
1. What You Paid Is Immaterial. The Market Sets The Price.
You probably have a dollar figure in mind—usually it’s based on what you paid originally, plus a little extra. Because homes appreciate, right? Sometimes they do and sometimes they don’t. While a hefty increase in value is nice in theory, ultimately, the market sets the price. The market is defined by buyer demand, competition, and economic conditions. Most of these we do not control.
Think of it like this: Would you buy a boat for $1,000 if that same boat were on sale down the block for $690? No one would do that; but of course, a home isn’t a boat.
No matter what you paid for your home, market values change—both up and down. This can work for you or against you. What matters on the open market is what buyers are willing to pay now. The good news is that right now (January 2018) it is a seller’s market. Inventory is down which helps push the housing prices up.
The best practice for pricing your home is to compare your home to similar homes that have sold recently. These are known as “comparables” or “comps”. Your Realtor® will pull this information for you but you don't have to blindly trust them; Ask Questions! Have them show you why they chose each comparable and how they used those comps to price your home. Don’t just trust your Realtor®, go over the comps yourself and you’ll be able to determine a price range as well.
Your Realtor® will give you a price range to work in. Pricing a home is not an exact science, each home is unique and therefore an agent can’t give you an exact price. When you price your home try and stay within that price range.
Some websites will give you an Automated Valuation Model (AVM), which allows you to type in your address and the computer magically spits out a price for you based on an algorithm that really only works in a large city. In our area we do not have cookie cutter houses and so the AVM is, in my experience, wrong. Very rarely do they get the price right and they are usually off by 10’s of thousands of dollars.
3. Factor In Upgrades With A Grain Of Salt
Upgrades are incredibly important in any home to maintain your value and keep your home up-to-date. But every upgrade affects the pricing differently. According to costvsvalue.com, attic insulation is the best upgrade you can do to your house but you will only recoup 89% of the cost. Yes that’s right, only 89%. So if you spend $1,000 on insulation you will only recoup $890 of that in a sale. Don't let that stop you from doing an upgrade though. If you will enjoy that new kitchen or larger living room then there is a good chance that a buyer will too. All upgrades will translate into great selling features during the marketing time. That one upgrade, could mean that your house will sell before the neighbors but don’t expect to recoup the whole cost of any upgrade. The exceptions to this rule is if you add square footage or do all the work yourself, but make sure you do it well. Buyers are notorious for picking apart any do-it-yourself jobs. Check out costvsvalue.com for more information before you do those spendy updates.
4. The Difference Between Asking Price and Sales Price
Everyone loves to negotiate and most people expect Seller’s to set their ASKING price higher then what the final SALES price will be. So when marketing your home, you want to be above your bottom dollar. If you want to sell for $150,000 your asking price should be between $155,000 and $160,000. Keep in mind, each price range is different so while a home under $100,000 is more likely to have a sales price closer to their asking price, a home over $400,000 could be seeing a $10,000, $20,000, or even $30,000 difference between the asking and sales price. Don’t go too high though or you might lose buyers who think your asking price is unrealistic.
(On a side note: Most buyer’s need help with closing costs to secure their loan. Offering to cover their closing costs while sticking to your higher price might help the sale happen.)
5. Don’t Forget The Internet
Now that you’ve settled on a price range, we need to factor in online searches. MOST buyer’s start their search online to find a house. If your home is $2,000 over their highest value (say you are asking $152,000 but you will take $145,000 and the buyers top price is $150,000) they won’t even be exposed to your home. It would be in your best interest to attract more eyes and set your asking price at $150,000. You can then negotiate closer to your asking price because your home will be the cream of the crop in that price range. So if you’re close, consider rounding down.
That’s it for now! If you have questions don’t be afraid to email me directly. I’d be more than happy to give you a free market consultation, advice, or just answer quick questions before you start the selling or buying process.
Stay Warm and Best Wishes,