This is a question I am asked all the time. The simple answer is, “It varies.” Different Realtors® arrive at the figure differently. As in any profession, some will take the time to study the market and put some time into arriving at a price. Others will take a stab with little or no research. Still others will let the seller dictate price.
Pricing a home is critical in any market (i.e. buyer’s, seller’s, or balanced market). Overpricing a home at the outset can cost the seller stress, time and, eventually, money as studies show that homes overpriced initially sell for less. Why? Buyers think that if a home is on the market for a long time, there is something wrong with it, or they think that the seller is not going to sell at a fair price, so why bother.
Pricing a home is an art, not a science. When I am looking for a ‘fair market value’ price of a home, I will begin with a Comparative Market Analysis (CMA). This is done by inputting the pertinent parameters into the computer database software and letting the computer do the search. But this is only a beginning! Then I spend time investigating the market, looking carefully at the current competition, studying previous home sales, and looking at what stayed on the market too long and ending up as ‘Expired Listings.’ When looking through past sales, depending how active the market is, I am looking back only 30 to 60 days at what sold in the neighbourhood, attempting to get the most recent or ‘current’ prices. In studying current listings and past sales am looking for the best comparables, eliminating any home that is too dissimilar to the home I am trying to price.
Certain things come into play when trying to find the best comparables—lot size, square footage, age, condition, features, updates, overall attractiveness, asking price/assessment value ratios, etc. Next, I will often view homes that are the current competition and put myself into the buyer’s shoes noting the features of those homes—both negative and positive. If I can get the seller to go with me to these viewings, all the better! These are the homes that buyers will likely look at anyway, so we’d better know our competition! A good number of homes—both current listings and recent sales--with which to compare in a CMA is ten to fifteen.
Another factor that comes into play is taking into account the number of comparable homes that are the seller’s competition. If there are only two or three homes on the market that are similar to the home in question, then a slightly higher price might be expected than if there were 12 or 13.
Many sellers have the Taj Mahal Syndrome—“An illness experienced by owners or those who hold an interest in real property that is chiefly characterized by the acute misimpression that the home or real estate at issue is sufficiently unique as to inspire a pilgrimage of buyers, an inexplicable and mystical feeling of love in those who view it, and/or landmark status.” (via Tni LeBlanc, Realtor®, Santa Maria Homes, Central Coast)
A home is only worth what someone is willing to pay at a given point in time in the marketplace. A well researched and executed CMA is the basis for pricing a home correctly—not someone’s whim or fancy, not what the seller dictates.
Wishing you a wonderful day,
Selling Homes in Beautiful Victoria!
Specializing in residential and revenue properties in...
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