What to Consider When Pricing Your Home
Pricing a home correctly is typically the most challenging part of listing a home. To successfully sell a home, an accurate price must be in place to
compliment a solid marketing strategy as outlined in our Marketing Your Home guide. Study after study points to the fact that a home’s value decreases the longer it’s on the market. That is why pricing your home accurately from the beginning will typically generate increased activity from buyers and higher offers. Contrary to the popular belief that a higher list price will yield a higher sell price, over pricing will actually drive the value of your home down because it will sit on the market for a long time. These days, buyers have access to the same information as Realtors and are not fooled by an overpriced home; they will typically steer away from it if they believe the price is too high.
1) Comparative Sold Properties
Analyzing recently sold comparative properties or “comps” is one of the best ways to identify a fair market value for a home. It is typically best to search a radius around the property of similar homes that sold within the past 6 months. The search radius will be determined by how highly populated the area is. For example, if you are close to Boston you may only need to search a half or a quarter mile radius because it’s densely populated. If you are in a more rural area, you may need to search a radius of a mile or two wide to obtain a higher quantity of home information.
2) Under Agreement Date of Sold Properties
This is as important as #1 but it is often overlooked by home sellers and agents. It is necessary to look at the date the offer was accepted on a home because you have to consider what the market was like at that time. If the market exhibited low inventory, the sale price may have been driven up because buyers likely competed for the home. Contrarily, if the market exhibited high inventory, the sale price would have been driven down because sellers were likely competing for the sale. Every year from June through September, home sellers see what their neighbors’ homes sold for that past winter and they want to price their homes for the same amount or sometimes even more. Winter and spring’s low inventory and higher sale prices should not influence summer or fall’s listing prices because inventory is higher generally at that time of the year.
3) Comparative Active Properties
Looking at other homes that are currently for sale in the area is a great way to see where your property would fit in and how it would compare. Marketing and attractively pricing your home to create a sense of urgency is the key to beating the competition and selling your home. Many sellers compare their homes to the other active homes and want to price above them. If a home similar to yours is on the market and isn’t selling you should not list your home for that price and certainly don’t list it higher. Instead you should list lower than them to give yourself the competitive advantage!
4) Current Inventory
Real Estate is all about supply and demand which is why this is also very important. This consideration is very similar to #3 because it is again about competition. When inventory is low, sellers typically sell for more as we explained in our List in the Winter and get a Higher Price blog. Ask your agent for reports on how inventory is in your entire town and the abutting towns. The higher the inventory, the more choices buyers have and the less they will be willing to pay; the lower the inventory, the more they will pay.
5) Market Condition
Since the beginning of the real estate recovery in 2012, the market has continued to improve but there have been setbacks along the way. In fall 2014, the market hit a slow down which caused November home sales to be down 3% compared to 2013 and additionally, November 2013 was not a great month either. Snowmaggedon’s excessive snow during the winter of 2015 drove sales down in February, March, April, and May, and pushed the typical spring peak out through the entire summer of 2015. This offset peak artificially inflated Summer 2015 Sales and made sales in Summer 2016 appear low when they were actually right on point. Other than these isolated events, the market has been strong and predictable, especially this year.
If you have to sell your home at a time when market conditions are inhibited, all the same considerations above apply but you will likely have to price more competitively in order to sell. If your home is listed and not selling, we recommend you visit our blog on adjusting the price of your home.
Try not to overthink or allow emotion to dictate your price. It’s a business transaction first and foremost. The market right now is strong, so as long as you price within reason and market correctly, your home will sell. Knowing how much competition you have should determine how aggressively you and your agent price your home. Do your research and price competitively.