How to Strategically Price your Home
When the National Association of Realtors surveys for-sale-by-owners every year they typically find that the most challenging aspect of the process for them is setting the appropriate price. We know, however, from speaking with our clients, that pricing a home is a two-part process – first determining its market value and then strategically choosing a price that will be attractive to buyers. Today we’ll walk you through both aspects in our efforts to help you get your home sold in the least amount of time and for the most money possible.
What is Market Value?
There are three ways to evaluate a home. The first is the assessor’s value which is calculated for tax purposes and is based on a percentage of the appraised value of the home. The assessed value has little to nothing to do with the home’s current market value.
The second method of valuation is the appraised value. This is the value of the home estimated by a professional property appraiser, typically hired by the buyer’s lender. Sometimes the appraised value won’t match market value. Sadly, it doesn’t matter, as the figure the appraiser comes up with is the maximum amount the lender will loan on the purchase of the home.
Market value, on the other hand, is the amount of money a willing buyer will pay for a home. It’s fluid and ever-changing, depending on market conditions. It is based almost solely on the sold prices of similar homes in your area. The prices of homes currently for sale in your neighborhood are not a reflection of market value; they merely reflect what the seller is hoping to get for the home.
The first step in the process is to estimate, as closely as possible, your home’s market value. There are two ways to do this: Ask a real estate agent for a comparative market analysis (they are typically free) or hire an appraiser to find the appraised value. Both methods have advantages and disadvantages. TIP: Do not rely on Zillow’s “Zestimates” when figuring out how much to ask for your home. These have been proven to be highly unreliable.
What’s the current market like in your city? Is it a buyers’ or a sellers’ market? This is important information because it will let you know what to expect once your house hits the market. In a sellers’ market the action will be swift and maybe frenzied and your home may bring in multiple offers. It’s tempting to overprice your home in this type of market. A buyers’ market, on the other hand, since there are fewer buyers and more homes for sale, will move slower. In this type of market it’s more important than ever to ensure you have priced your home appropriately.
Make your Price MLS-Friendly
Once you’ve determined the price you’ll ask for the home you may want to adjust it slightly up or down to make it easier to find when agents and others search the Multiple Listing Service database.
Known as “charm pricing,” many real estate agents employ a strategy of marketing the home at a slightly lower than round-number price. For instance, instead of $250,000, the home is listed at $249,900. Believe it or not, charm pricing is a source of much debate in the real estate industry with some studies saying it makes sense while others are opposed to the idea, saying it may work against the seller.
The most recent research shows that potential homebuyers spend the most time viewing the first home in their online search results. Since homes are typical listed in a database according to price, from low to high, the charm-priced home will come up last in the search – homes that may not even be viewed by the buyer.
Stick to a round number when pricing the home to ensure that your home gets the most online views as possible.