Are you planning to sell your home? If so, you might be wondering how to price your home competitively before it goes on the market.
Price too high, and you risk your home staying unsold on the market for long. But price it too low, and you could be losing thousands of dollars in the final deal. When figuring out an asking price, it is essential that you do the research and legwork necessary to ensure you get the best price possible.
Here are five factors worth considering when pricing your home.
Neighborhood Comparables
Sale prices of similar homes in your area that were sold recently are often the best indicators of your home’s worth. This is often referred to as comparables or comps. Whether it is a comparative market analysis or home appraisal, real estate agents often rely on comps to figure out your home value.
However, the problem is that no two comps are the same. So, you will have to make adjustments for key differences. It is often difficult to do this manually, especially when it comes to comparing granular details, such as proximity to a good school, vaulted ceilings, scenic views, etc. To come up with an accurate figure, you should account for each different feature—meaning you will have to look at a lot of comps.
Fortunately, real estate agents have access to resources, allowing them to easily analyze neighborhood comparables. Hence, it is always a good idea to leverage your realtor’s help with this task.
Location
Your current home might be located in an ideal neighborhood for you—close to your parent’s house or near your workplace. But, when appraisers determine your home’s value based on the location, they primarily focus on three indicators:
- The quality of local schools
- Employment opportunities
- Proximity to amenities like shopping, entertainment, recreational centers, etc.
These factors are why homes in some neighborhoods command top dollar prices and others a few miles away don’t. Additionally, the location’s proximity to utility lines, highways, and public transit will also impact your home’s overall value.
To put it short, location proves to be more important than the size and condition of your house when determining its value.
Home Size and Upgrades
When trying to figure out your home’s market value, size is a crucial element. Typically, the value of a home is roughly estimated based on its price per square foot. For example, if a 2,000 square foot house sells for $200,000, its price per square foot will be $100.
In addition to square footage, a house’s usable space also matters. Garages, unfinished basements, and attics are not generally considered usable square footage. So, if you have a 2,500-square-foot home with a 500-square-foot garage, that’s only 2,000-square-feet of livable space.
Both home buyers and appraisers value livable space over garage space. Bedrooms and bathrooms are highly valued. So, the more bedrooms and bathrooms your home holds, the more your home will be worth.
Similarly, updates and upgrades also add value to your home, especially if your home is older and has outdated features. Nonetheless, not all upgrades are considered equal and can vary depending on local standards. For instance, a finished basement in Portland is 5x more valuable than one in Atlanta.
Furthermore, specific projects like adding wood floors and a pool tend to significantly raise a home’s value.
Age and Condition
New homes typically appraise at a higher value. The fact that crucial parts of the house like electrical, plumbing, appliances, and the roof are newer and therefore less likely to break can help the buyer save money in the long run. For instance, if a roof has a 20-year warranty, the home buyer gets to save that money over the next two decades compared to a significantly older home that may require an immediate roof replacement. The average cost to install or replace a roof falls anywhere around $8,000.
Often, buyers will pay a higher price for a move-in-ready home. For this reason, most buyers have an inspection contingency in their contract—they are looking to negotiate repairs to steer clear of major expenses following the sale.
The Local Market
Even if your home is in pristine condition, in the best location, with the latest upgrades, the number of other houses for sale in your neighborhood and the number of buyers in the market is going to impact the value of your home.
If there are a lot of buyers in the market and fewer homes for sale, it is referred to as a seller’s market. In contrast, a market with fewer buyers but many homes for sale is called a buyer’s market.
If you are selling in a buyer’s market, you will have to adjust the price or be willing to make concessions like paying closing costs, being more flexible with the timeline, or covering repairs to attract more offers from potential buyers. However, if you are in a seller’s market, you can price your home a bit higher than you could in a buyer’s market.
Furthermore, market conditions will impact how long it takes your home to sell. In a seller’s market, homes sell fast, whereas, in a buyer’s market, it is quite normal for houses to see longer days on market (DOM).
DOM is a term used in the real estate arena that indicates how long houses are actively listed before contracts are signed and the deal is closed. If your home has been on the market for long, potential buyers might perceive there is something wrong or that its asking price is too high.
Concluding Thoughts
Selling your home can be an emotional journey. You are not moving out from a mere building but a space that holds lots of memories. Hence, it is easier to make mistakes, like pricing your home high or low. However, with the tips listed in this article, you can easily avoid the common home pricing mistake, thereby attracting more buyers and preventing long days on the market.
