You may want to read the previous chapter on things not to do before selling a home here.
The whole idea, of course, is to get the maximum price and the best terms during the window of time when your home is being marketed. There is no certain price conclusion; it is literally ‘what the market will bear’. That’s why the sale price of a home can be very different than its assessed value for tax purposes.
Photo by Monique
Price is subject to many factors, one of which is location. In a community with an expanding job base, a growing population and a limited housing supply, it’s likely that prices will rise no matter what the economy at large is doing.
Owners who must sell quickly may have less leverage in the marketplace than those who can afford to wait – wait for the holidays to be over, wait for similarly priced homes to sell in their neighbourhood, wait to complete needed repairs.
As a seller, it’s important to remember that price does not depend on what you hope to net, but rather on the principle of supply and demand. That being said, there are definitely things you can do to get a better return on your investment! We have already mentioned the improvements you should make to your home, the things you should not invest into, and in the next chapter, we will discuss some effective marketing practices.
Sale price is not the whole deal, anyway. The Agreement of Purchase & Sale may include other stipulations, such as closing date, conditions, even the state in which you hand over the house (leave appliances in, make a few small repairs, etc.). All of these conditions can have bearing on how happy you are with the sale. The amount of flexibility you will have to demonstrate to close the deal depends on local market conditions.
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Even if you’re not planning to sell your home right away, many Realtors® will be willing to prepare a comparative market analysis (CMA) for you as a marketing service with the goal of getting your business when you do decide to move. The CMA uses a number of tools, such as recent sales of comparable properties in your area and a personal inspection of your home, to determine the anticipated market value of your home. The accuracy of the CMA depends greatly on your agent’s experience in the market.
You may also want to purchase a professional home inspection (the fee is typically $400). This type of appraisal relies on an in-person inspection of your home to evaluate the conditions of the ‘building envelope’ and your home’s major systems, such as heating/cooling, roof, water, etc. The home inspection report contains a summary of your home’s overall physical condition as well as detailed notes of every part of the house. Though some prospective buyers prefer to commission their own independent report, for the most part, getting it done yourself before your home goes up for sale may help you prove that your house is indeed worth as much as you’re asking for it – provided it is in a decent state of repair.
You can always check online listings for houses that have recently sold in your area and use their prices as a starting point. Ask your Realtor® if they are truly comparable to your home and if not, what the differences might be.
Price per square foot is a time-honoured method of real estate valuation used primarily in condos, and not a bad rule of thumb for new homes. However, it doesn’t account for a choice location, a move-in-ready home or other personal criteria, and you should also factor in how the property was measured. Remember, square footage does not include below-ground space, however nicely finished, nor closets, hallways and baths – and it can differ substantially from the original builders’ plans.
Photo by Kimberly Jones
The Importance of Proper Pricing
Price matters! You might think you can just set a high price and work your way down to what you really want during negotiations, but that’s not the case. Overpriced homes attract fewer buyers, who either think they’re being taken advantage of, or don’t even see your home as a possibility because the price is too high. Once your home sits on the market with little activity, you may become worried and lower the price, but it could already be too late; your home may already be known as the one that’s been ‘For Sale’ forever.
Under-pricing can be a valid strategy because it can create a lot of interest and even a bidding war, but it’s one that shouldn’t be overdone. Pricing too low can attract a lot of people all right, but they may be bargain-hunters with little flexibility to go as high as you want them to in a multiple offer situation. Homes that are priced well below market value can also arouse suspicion, as in, ‘What’s really wrong with the place?’
Price your home as closely as possible to market value, no matter what your personal opinions may be. This will ensure a timely sale at a fair price that makes everyone happy.
Now that you know how to approach the pricing of your house, learn how to best market the house in the next chapter.
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