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When it Comes to Selling Your Home, Make Sure the Price is Right - 2008-08-17 |
Knowing where to price your home in today's turbulent real estate market is tough, and starting with the right asking price is more important than ever. Agents and sellers agree that listings get stale quickly, and the highest level of interest a home will generate is often immediately after it hits the market.
If a listing gets a reputation as being overpriced, agents won't waste their time showing it and buyers simply rule it out as a possible purchase.
At the same time, with slowed appreciation and more aggressive buyer demands, it's more important than ever for you to get every penny you possibly can in the sale of your residence.
No one wants to leave money on the table, especially when we are talking about thousands of dollars.
So here you are, between a rock and a hard place, trying to decide where to price your home. If it makes you feel any better, I have been in this position with my own property hundreds of times and it doesn't seem to get any easier.
So why do we torture ourselves? Because it's real, green, spendable money, that's why.
The price you ask for your home is the third leg of a stool supporting your sales effort. We already covered how important the condition of the house is, and decided that buyers in this market don't want to take on a project. And we already talked about marketing - spreading the word to potential buyers that your home is available and desirable - and how that can be done in multiple ways.
But the price you ask for your home is vitally important. And where you set that price can mean the difference between a relatively quick sale and an expired listing. Here are my suggestions:
First, it's important that you have all the information about the recent sales of similar homes in your neighborhood for the past twelve months. You should ignore any sale that occurred more than a year ago. It's "ancient history" from a valuation standpoint.
Sales less than six months old are considered most indicative of current value, but there may not be enough recent activity to justify a price, so consider sales up to a year old.
Also, try to confirm that each sale is as similar as possible to your home. Is the bed and bath count identical? Is the heated and cooled square footage comparable, and does your home offer similar amenities to the homes that have sold? The closer they are to identical, the greater the strength of that comparable sale.
Appraisers make complicated adjustments to compensate for physical differences between houses, but you can still get a good idea of the general price range of your home by being familiar with sales activity in your area. And try to only look at sales near your neighborhood. The closer the home to your house, the more relevant the information.
Unless they also carry an appraisal license, your real estate sales professional is not allowed to perform appraisals of real property. But they are trained to conduct a "Competitive Market Analysis."
Also known as a CMA, this is typically a brief look at past, current, and upcoming sales activity within a neighborhood, and can be extremely helpful in getting a snapshot of values in a certain area. This CMA is not a replacement for a comprehensive appraisal, and carries no formal weight with lenders or, for that matter, buyers.
But I always recommend that you begin by asking several experienced real estate agents in your community if they would be willing to perform a CMA analysis on your home, since you are considering selling. While you will have no obligation for requesting this service, you should know that the agent is hoping that you might later select them to be your listing agent when you sell.
After you have become familiar with prices in general in your community, I think it's smart to hire an experienced professional appraiser. This will cost you several hundred dollars, but it's the only way you will be able to justify your asking price to buyers in today's tough selling environment.
You have every right to discuss the comparable sale information with your appraiser before the appraisal is performed, but you cannot make your engagement of the appraiser contingent upon a hoped-for outcome. Instead, the appraiser will consider all the sales information that you gathered and more from available sources. Then a final estimate of value will be made.
If you are dissatisfied with the estimate of value from your first appraiser, you may choose to tear it up and order another, but it is likely to be similar to the fist one. Appraisers have a remarkable habit of coming in with several independent valuations in a very tight grouping.
My advice is to get an appraisal in hand that you can live with, and price your house there to the very penny. Make copies of the whole appraisal, and hand them out to anyone who is willing to walk in the door.
Then you can honestly say to them: "We didn't know where to price our home, and didn't want to ask more than it was worth, so we had it appraised. Here's the appraisal."
With those words you have added tremendous credibility to your asking price, and possibly pre-empted numerous rounds of haggling and low-ball offers.
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