Knowing how to price your home correctly isn’t rocket science, but it’s still tricky. Consider these four factors to avoid pulling a figure out of thin air.
1. Property Valuation
Your home value is the primary determiner of your asking price. Unless you’re desperate to sell and willing to accept less than what you still owe on your mortgage, price your house based on what these sources say it should be worth.
Comparable Properties (Comps)
Listings with similar specs — lot size, square footage, number of bedrooms and bathrooms, floor plan, and architectural style — as your home sold within the past six months are excellent points of reference when pricing your house. Search real estate listing sites to find suitable candidates. Maximize all filters, like school district and neighborhood amenities, to narrow your list to six. Then counterbalance the estimated price on those sites with the valuation seen on Eppraisal.com.
Your goal is to calculate your home’s price per square foot, so divide the selling prices of your comps by their square footage. Finding comps with identical features is difficult, so make dollar adjustments as you crunch the numbers. Your biases toward certain home qualities may skew your calculations, so be aware of such tendencies.
Better yet, use a real estate agent to do a comparative market analysis and calculate your home’s value impartially.
Mortgage lenders use home appraisal reports to make credit decisions, so hiring an appraiser can help you learn about your home’s current market value more objectively.
This licensed professional is generally more competent to do such a valuation than most real estate agents. In addition to comps, they pay attention to current market trends and personally look at the property’s interior and exterior and note defects.
Online Home Value Estimation
Informal home appraisal tools can give you ballpark estimates of how much your property is worth. These online calculators are data-driven but leave out key details appraisers factor in when generating reports. Use them as a starting point for a conversation with your real estate agent.
Your property’s assessed value can help you verify your appraisal’s reliability because it’s almost always lower than its appraised value.
2. Market Conditions
You determine the asking price, but the market ultimately decides the selling price. These indicators paint a picture of the imbalance between supply and demand:
● Real estate inventory: High housing inventory means few properties are changing hands in your area and gives buyers control in the market. Pay attention to rental inventory, too. Few available rentals can drive up rents and may incentivize tenants to buy houses instead.
● Housing Affordability Index: This tool from the National Association of REALTORS® tells you whether households have enough income to qualify for a mortgage on a median-priced home.
● Mortgage rates: High interest rates increase the cost of borrowing money, discouraging buyers from taking out a mortgage.
● Time on the market: On average, homes sell 18 days after getting listed. Properties spending longer than that can mean they’re undesirable for being structurally unsound, unaesthetic or overpriced; or there’s weak housing demand.
● Time of year: Spring is usually the hottest real estate season, while winter is the coldest.
3. Home Improvements
Strategically enhancing your house’s look or function can increase its value. Any project that can recoup at least 80% of the cost at resale offers the best bang for your buck.
Some of the best examples are minor kitchen remodeling, manufactured stone veneer additions, and entry door or garage door replacement, which have a return on investment of 83.1% or more. If you tackle any of them, you can recover most of the cost when you sell your property.
4. Buyer Mentality
Real estate investors and aspiring homeowners think differently when making offers. Investors want to acquire houses pennies on the dollar, flip them, and sell them at a profit. Conversely, mortgage borrowers are willing to pay more for the right reasons.
Whether you target investors or aspiring homeowners, consider value ranges when finalizing your asking price. Pricing your home on a range’s lower end, using a figure ending in zero, and thinking about search parameters are vital in attracting as many potential buyers to your listing as possible.
Price Your Home Right
The only thing worse than overpricing your home is asking for less money. Using the four considerations above, you can decide on a reasonable asking price without deterring serious buyers.
Evelyn Long is the founder of home living magazine Renovated where she writes about the current housing market and real estate. She has also written for publications like National Association of Realtors, Building Enclosure, and McKissock.