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SELLING A HOME - PRICING YOUR HOME TO SELL
While emotional attachment can make a house a home, the actual value depends on many factors. These include the neighborhood in which the house is located, the condition of the house, current market conditions, interest rates and the length of time the house has been for sale.
How can you determine the actual value of your home? First, your real estate broker can give you a good estimate of the home's worth by completing a thorough market analysis. They will research housing demands in the neighborhood, compare recent sales of similar homes, view current competing homes now on the market for sale and look at the availability of financing. By analyzing this data, the broker will suggest a competitive asking price and provide a probable range of value, without obligation.
Having an appraisal done by a professional appraiser is another way. A professional appraisal can cost from $350 up, depending on the market. In residential real estate, the sales comparison approach is typically used by both a broker and an appraiser to arrive at current value. The subject property's value is directly linked to the sales prices of comparable properties ("comps") that have closed within the last six months. Since market conditions may vary dramatically over several months, recent sales are reviewed more closely than sales that occurred six months ago or longer. The rationale for this approach is that a knowledgeable buyer will not pay more for a property than the cost to acquire a comparable alternative property.
The broker or appraiser locates three to five comparable properties in the same neighborhood or general area and makes adjustments to the sale prices. They add the value of features found in the subject property but not in the comparable one, and subtract the value of features present in the comparable property but not in the subject property. For example: if the subject property has central air conditioning and one of the comps does not, and the value of the central air conditioning is $3,000, then $3,000 would be added to the sales price of the comparable property. If, however, the subject property does not have a garage, which is valued at $7,000 in this area, but a comparable property does, then $7,000 would be deducted from the sales price of the subject property.
Adjustments may also be made for the physical condition of the home, such as worn or damaged carpet and vinyl, outdated wallpapers, faded exterior paint, needed interior painting, and old appliances or heating/air conditioning units. For top evaluation, your home should be in top showing condition.
Your property's value will also be based on the type of market. Is it a buyer's or seller's market? How long is the typical home taking to sell? Your broker will provide you with information on the recent sold properties and the current competing homes. The current supply of homes, along with the availability of new construction, will also play into the value. Newer homes may have features and upgrades that buyers demand, so an analysis of these issues should be a part of the overall market report.
Your real estate broker will tell you that a home priced competitively from the start will attract more buyers in the critical first 30-45 days than one that is "overpriced." Buyers expect to negotiate and pay less than the asking price normally, but may be turned off to a property unrealistically priced. What you paid for the property last year or several years ago may not be reflective of today's value. Many markets have experienced appreciation, while others have seen values remain steady or decline. Don't be fooled by someone promising a higher dollar amount for your home than anyone else, unless they have the data to back up the value. They may be trying to secure your listing, but then will not be able to sell the home, resulting in longer marketing time and eventually a lower list price.
Pricing is very important. Lending institutions will base their loans on the appraised value of a home, not the selling price. So while a seller and buyer may agree to a specific price and terms, the lending institution will objectively review the market, determine what they feel is "fair market value" for a piece of property, and base the maximum loan amount on this figure. Should a home be appraised for less than the sales price, a buyer may elect to pay the extra amount above what the lender is offering as a loan or void the transaction altogether. Consult with your real estate broker as to your options should this occur.