As a follow-up to the last article, Pricing Your House to Sell, we’ll now dive into the pricing process.
To begin, check out what you can about your property online. There are many free sites (free is good) and some are, of course, better than others. Try different ones until you find the ones you prefer.
- Zillow.com is a popular site and quick resource for property information. This is good for comping an entire area because, once you put in an address, surrounding homes pop up with price estimates on every roof.
- Real Estate ABC.com gives a fantastic chart of recent area sales.
- Realestate.com works to look up properties listed by real estate agents.
- Trulia.com is another popular site for property information, stats and trends.
Start with houses whose value you know: comp your house, your parent’s home, even your neighbor’s. This will give you a good idea of the accuracy of the different online sites. Values can vary tremendously depending upon things like whether they include foreclosures or short sales in their comps.
Online sites are a fast and easy way to start but, to list your property, you’ll want something more accurate. Agents as well as potential buyers will also be working to justify your asking price. Following are the two main methods for determining property values: comparable sales and cost per square foot.
Comparable sales (Comps)
Comparable sales are the most commonly used method to determine property value. By comparing similar characteristics between homes of comparable size, value, age, and location, you are better able to determine the true property value of your property.
I’ll cover the Comparable Sales method in more detail in the next post.
Cost per square foot
Cost per square foot is the second most commonly used method to determine property value. This method is used to compare properties that have a number of differences or for properties being sold at different prices.
To calculate your cost per square foot, divide the asking price of your house by the number of square feet: Price / Square Feet
Example: If your asking price is $100,000 and your home has 1,200 square feet, divide $100,000 by 1,200. The answer is the cost of your house per square foot—$83.33.
Check the cost per square foot of other homes in your area to see if you are inline with what they are asking.
Pricing is Important
Investigate your competition before you decide on your listing price. You may even consider getting a professional appraisers value before setting your price. Appraisals are less biased and more accurate than a brokers price opinion (BPO) from your agent. And, it will help you know whether, once you have an offer, the bank’s appraiser will agree with your asking price.
Studies show that pricing too far outside the area’s price range can actually slow down the sale. Too high is never good and too low makes buyers think something is wrong with the property. Another reason to do your due diligence when comping. Be sure to price accurately from the beginning.
Houses get the most attention the first 2-6 weeks they are on the market. Automated search programs sort through new listings and email them to buyer lists. Buyers constantly search for new listings. And, if you house doesn’t sell, buyers, agents, and neighbors question what’s wrong with your property.
Your property “fair market value” is determined by looking at and comparing recent sale prices of similar properties in the area. When determining value, compare prices of properties that have sold rather than using properties that are still listed for sale, as most homes sell for less than the listed price.
A great way to begin learning true value is to search real estate listings and visit open houses in your area. This will help you get a feel for local pricing. When visiting open houses, go to ones that are more expensive and less expensive than your property. The more you see, the more you will begin to understand what your property is worth and what value things like a bedroom or bathroom add.
There is a lot of property information available with the click of a mouse. Find everything you need to know before you set your price.
Price is the key. If your house isn’t selling, you could be asking too much.
In the next selling post, I’ll be covering the Comparable Sales method in more detail.
For more and detailed selling information, check out The Essential Handbook for Selling a Home.