Pricing Your Home
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How to Price a Home
Pricing Your Home
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Pricing your home properly is possibly the most important thing you can do to sell it quickly and easily. Overpricing is one of the most frequent reasons FSBO sellers fail. In fact, many times, when a FSBO seller gives up and lists their house with a real estate agent, the house sells because the agent convinces the seller to reduce the price. Since you will not have a real estate agent involved to provide this “reality check” for you, you must perform the check on yourself. Be realistic and do your homework. Keep in mind one of the reasons buyers are interested in FSBO properties is because they think they will share in the savings of the real estate commission. If you are not offering to share any of the savings, it is possible that buyers will simply move on to traditionally listed properties. Pricing a house is one of the areas in FSBO selling where spending a little money up front to get the necessary info is very helpful.
There are many tools and methods to help you price your home:
- The common means of valuing real estate for all appraisers, lenders and real estate agents is to base the value on comparables, also called comps. The best comps are similar homes that have sold in the immediate area within the past six months. You can obtain a list of sold properties by ordering a home comparable report from Owners.com or another vendor. Once you receive the comps, you will have to assess the relative quality of the location, condition and features of your house as compared to the comps. You should be able to get a good sense of this from the comp report. For instance if a 3 bedroom home right around the corner sold for $5,000 less than a nearby 4 bedroom, the approximate value of the extra bedroom is $5,000.
- After you have a comp report that shows what has sold in your neighborhood, spend a couple weekends visiting open houses in your area. Go to neighborhoods that are very much like yours, with houses of similar style and size and approximate price range. Although appraisals are based on SOLD comps, it is useful to see what is for sale now to get a sense of the current real estate market. For instance, if listing prices are lower than what you think your home is worth, that is an indication that house prices may be falling your area. Conversely, if listing prices are higher than the sold comps indicate, that is an indication of prices moving upward.
- Have a “desk appraisal” done which indicates a range of value. A desk appraisal means the appraiser will not visit your home, but rather will pull comparables from closed sales (they may well have more recent comps available than you can obtain from any source) and assign a range of value. Where you price your home within the range is up to you. The cost of this option is about $60, and you will have a formal document with which to justify your price to prospective buyers. Appraisers can be located through the Yellow Pages in your area.
- Have a formal appraisal completed by a licensed appraiser. The appraiser will come to your home, measure it, inspect it, take pictures and assign an actual market value. The cost of this option is about $300. A professional appraiser will provide you with a formal document that you can use to justify your price to buyers. Keep in mind that your prospective purchaser’s lender will have to order another appraisal and will probably not be able to use yours. Appraisers can be located through the Yellow Pages in your area.
- Another alternative is to ask a real estate agent in your area to do a Comparative Market Analysis (CMA) for you. You probably receive cards in the mail from Realtors who farm your neighborhood or know of Realtors in the area. Obviously, you should tell the agent that you intend to sell the house FSBO, before they put in any time on your behalf. The agent will then make a decision whether to help you or not. Most agents will because they want your listing eventually. Undoubtedly, an agent will try to talk you out of selling by yourself. Listen to all the information and then make up your own mind.
Once you’ve got a range of value or an independent appraisal of the property, you will still have to arrive at an asking price. Unless you are in a very fast market (houses sell within 30-45 days), you should assume that you will get an offer for less than your asking price. Generally speaking, most houses sell within 10% of a reasonable asking price. Set your price at the high end of the reasonable range if your house is in excellent condition compared to other houses for sale in your area and/or the market is fast. Set your price at the lower end of the reasonable range if your house needs work, doesn’t show as well as it could, or the market is slow.
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