If you are thinking of selling your home, then luck is on your side. Thanks to the recent trends in the real estate industry, it is safe to say that you’ll be getting an excellent price for your home. Even with slower sales activity and price corrections, real estate has appreciated so much over the last decade that the vast majority of home sellers would realize a big capital gain upon the sale of their home. But how big of a gain? How much you get for your home depends upon a variety of factors, including whether or not you priced the property accurately. Set the asking price too high and your home could sit and languish. Set the price too low and you could leave money on the table. So, before you jump into selling your home, you’ll need to consider how to price your home for sale.
If you don’t want to the hassle, don’t care if you get top dollar and just want a quick sale an easy option is to find out what other, comparable properties in the area have sold for and then price your home just below these sale prices. Chances are someone will realize you’re motivated and put in an offer.
Realistically, however, most sellers aren’t looking for a quick sale. Most sellers want to get the highest possible selling price. To help you achieve this, here are four steps for determining the best possible price for your home.
Step 1: Do Your Homework
Even if you’ve sold property before, setting the price for a house or condo or any other type of property can be pretty tricky. Market conditions, the overall economic health of a city, province or country, even neighbourhood desirability, all of this and will impact the supply and demand for homes in your community and this impacts the perceived value and final sale price.
To get a better handle of current market conditions, it’s best to do your homework. Researching the sale trends in your neighbourhood. Look at similar homes sold in the area over the last three months. Try and limit your comparison to homes that are similar. There’s no point in comparing your 1970s bungalow that’s never been remodeled to a large two-story new build with a pool — it, quite literally, is like comparing apples to oranges.
When you have a good list of homes that are similar, then consider what the differences are from one property to the next — and consider how these differences impact your house. For instance, did a property with a two-car garage sell for more than a property with a one-car garage? Did the 7th-floor condo with a large patio-type balcony sell for more than a 5th-floor condo with a tiny balcony? Were parts of the home remodelled? Renovated or updated? When were the homes listed and how long did they take to sell? All of this information can give you insight into what buyers shopping in your area value and this can help you determine an approximate perceived value for your home.
Step 2. Look at ALL the Listings
Listings provided by your Realtor (or through online sites that offer sold data) can give you a good idea of what sale prices homes in your area or complex are selling for, but you shouldn’t limit your search to just sold listings.
Ask for “withdrawn” and “expired” as well as “terminated” and “relisted” listings. These are homes that didn’t sell — and according to some industry standards, about 40% of homes don’t sell when first on the market. By doing the same examination on homes that didn’t sell you can get a better idea of potential turn-offs and a price range that buyers may consider “too high.”
Step 3. Compare Square Footage and the Upgrades
As a seller, you need to realize that some buyers get stuck on square footage numbers. This means you need to assess whether or not you are priced in the same price bracket as similar properties with comparable square footage measurements. This doesn’t mean that a larger condo will always sell for more than a smaller condo — very often it’s possible to get a higher price if you don’t ignore square footage, but focus on genuine upgrades or advantages. For instance, some people will buy a smaller home for more if it allows them to park the car and walk to work.
Another reason for becoming familiar with your home’s square footage is because this fact will be assessed by the appraiser. While it doesn’t always happen, some lenders will pay for an appraisal of a property in order to ensure the buyer isn’t overpaying. (No bank wants to lend a buyer more than a home is worth.) If your home’s square footage costs are not congruent with similarly sized properties, the appraiser will need to find reasons for this discrepancy. If they don’t find satisfactory reasons, they’ll report back an appraised value that may be less than your asking price (or worse, the agreed-on sale price).
As a general rule of thumb, appraisers will work with a 10% margin on square footage computations. This variance means that your 2,000 square feet home should fall into the price range of homes that measure 1,800-2,200 square feet within your community.
Step 4. Look at the Overall Market
Finally, get a read on what the current market is doing. Is it a buyer’s market? Is supply building up? Are homes selling quickly in your community or complex? Do you have any current competition, this includes homes that were recently listed for sale in your area as well as developments in the vicinity that may entice buyers to spend more on new builds.
If you are in a seller’s market or your neighbourhood or property type is in demand, consider a mark-up to your current market value price. Chances are the market will absorb this small price increase — and that means extra cash in your pocket.
On the other hand, if you find the market to be stagnant or falling, or if you find you’re in a buyer’s market, consider reducing your asking price. Keep in mind that under these conditions, most buyers will try and negotiate and this could mean a further reduction in the final sale price.
Selling your home can be emotional, so it can be hard to put a value on the property. But don’t be mistaken: Pricing is a significant contributor to how fast a home sells and whether or not a seller can get list price or above list price. Consider getting professional advice during this process and keep these steps and strategies in mind when finally setting a list price for your home.