Factors Affecting the Selling Price of Your Home
The value of your home will ultimately be determined by the real estate market. As prospective buyers research properties, they will quickly gain a perspective of the relative value of different properties and an awareness of the competitive factors of the market. The following key factors can affect the ultimate selling price of your home:
• Location is the single most important factor in determining the value of your home. The relative benefits of your property’s location will change the perceived value of your property.
Characteristics of your home
• The value of your home is greatly based on the hard facts about your home, such as lot size, living space, the number of bedrooms and baths, the total number of rooms, and other features.
• The condition of the property affects the price and speed of the sale. As prospective buyers often make purchases based on emotion, optimizing the physical appearance of your home will maximize the buyer’s perception of value.
• The condition of the property affects the price and speed of the sale. Since prospective buyers often make purchases based on emotion, optimizing the physical appearance of your home will maximize the buyer’s perception of value.
• Property values are affected by the current real estate market. When properties are selling quickly, there is pressure on buyers to present stronger offers. Economic conditions may impact the availability of financing and impact the number of qualified buyers.
• Pricing your home competitively from the beginning is an important factor in determining the length of time it will take to sell your home. Your Asking Price plays a significant role in determining which properties will be considered by a prospective buyer.
• The amount of positive exposure that your property receives can potentially affect the demand for your home. In ideal circumstances, multiple buyers will compete for your home.
• Your timing requirements for the completion of the sale, may impact the final price that you accept.
• The negotiating skill of your real estate specialist may have significant impact on the final return that you receive from the sale of your home.
What Doesn’t Determine the Market Value of Your Home
When considering the value of your home, it is important to note that the following factors have little or no influence on the market value of your house:
• The price that you originally paid for the property.
• The profit or returns that you expect to receive from the sale of your property.
• The amount of cash you need from your sale.
• The amount that you have invested in property improvements*
• The tax assessed value of your home
• What other sources have told you your property is worth, including friends, appraisers, and other real estate professionals that may have their own agenda in mind.
The Risks of Over Pricing
If your home is priced above the market value, you will not attract prospective buyers who would otherwise be prime candidates for your home. When your home is priced too high:
• Your home may be priced beyond the search criteria of potentially qualified buyers.
• Agent/Brokers may neglect to promote your property to potentially qualified buyers simply because it’s out of their expressed price range.
• Comparable homes at a lower price will seem more attractive to buyers; you could actually be helping to sell your competition’s home.
• It implies that you are not truly motivated to sell.
• Fewer prospects will respond to our marketing.
• Fewer Agent/Brokers will actively promote your home as a value to their prospective buyers.
• Fewer buyers will consider your home, and fewer offers will be received.
• You may lose buyers who are willing to negotiate.
• Marketing time is prolonged, and initial marketing momentum is lost.
• If a property does sell above true market value, it may not appraise at the same value, and the buyer may be unable to secure a loan.
Under Pricing Your Home
When you price your home under market value, you will likely leave potential money on the table, generating a lower net return. However, it is likely that you will have multiple offers allowing you the opportunity to select an offer that may best meet your timing needs.
Determining the Market Value of Your Home
An impartial evaluation of market trends and activity is the most effective way to estimate a property’s fair market value.
The Comparative Market Analysis (CMA)
Since location and property characteristics are the key elements in determining property value, we need to use similar (comparable) properties in your area to establish the basis for valuation.
A Comparative Market Analysis (CMA) considers similar properties that:
• Are currently on the market (active listings)
These are properties that will be competing with your home for the attention of available buyers.
• Have pending sales at this time
This shows homes that are currently under contract, but have not yet closed. Since these properties have not closed, their market value has not become public knowledge. However, these properties are a good indicator of the value of the current market and the list prices that are attracting “real buyers.”
• Have sold in the recent past
This shows us what “real buyers” in this market have actually paid for properties that are similar to yours.
• Failed to sell
These are properties that have been withdrawn from the market or have expired listing periods. Understanding why these properties did not sell can help us avoid disappointment in the marketing of your property. The listed price of these homes may suggest prices that are higher than buyers are willing to pay.
*Factors that do not affect
• Experience has shown that the closer the gap between the perceived market value of the home and the asking price, the more likely you are to receive an offer.
• Generally, homes that are priced more than 5% above the expected market value, will not receive purchase offers.
• You increase your chances of obtaining a timely sale at or near your asking price, when the when the price is substantiated by comparable sales information.
The Significance of Timing
When your property is first placed on the market, it attracts immediate interest from the real estate community and from potential buyers. Those first few weeks are your property’s prime selling time.
• As a property comes on the market, there is a backlog of existing buyers who have been actively
evaluating properties. In the first few weeks that your house is on the market, interested buyers will be excited to see if your home is what they’ve been searching for. If your home is priced right and shows well, you have the greatest opportunity to sell your home at this time.
• Within the first few weeks of being on the market, virtually all existing active buyers will have viewed your property. By week 5 (as shown in the graph below) interest in your property drops as you wait for new buyers to actively enter the market, and we will be marketing your home to one buyer at a time.
When you price your home too high in the beginning, you may ultimately need to drop your price below market value in order to attract buyers back to your home, and the property may eventually sell below market value.
• It is critical to have your home price competitively at the time we place your home on the market. Price and street appeal directly affect time on market. A home that sits on the market for too long acquires the stigma that there may be an inherent problem with the property.