One of the first steps to selling a home is determining a listing price before it goes on the market. Whether homeowners work with a real estate agent or opt to list the home as for sale by owner (FSBO), it is important to land on an appropriate price to list the home.
Real estate trends have a large influence on pricing a home. Trends in the real estate market are based on supply and demand. Currently, there are more people in search of homes to purchase than there are homes for sale. This trend is classified as a sellers’ market, meaning homeowners have a huge advantage in the real estate market. They can list their house at a much higher price than if it were a buyers’ market.
Determining a Home’s Market Value
The listing price of the home is the market value, which is what buyers are willing to pay for your home. The current owner’s mortgage payment does not determine it, but instead, many factors influence the market value. Factors of a home’s market value include:
- Safety of the neighborhood
- Curb appeal
- Square footage
- Number of rooms, bedrooms, bathrooms, etc.
- Updated appliances
- School district
- Mortgage interest rate
- Other homes nearby
- Supply and demand
An additional factor that may influence a home’s market value is the time of year. Potential buyers are much more likely to be searching for homes when the weather is milder. People also tend to move during the summer months as opposed to winter when the weather is more unpredictable.
There are several tools that sellers can use to determine appropriate listing prices for their homes, such as free online estimates, appraisals, and competitive market analyses.
Free Online Estimates
Various online resources such as Zillow.com and Remax.com have public information about homes, such as the type of home, the year it was built, square footage, and much more. In addition to this information, these resources often include how much previous owners paid for a home and the estimated market value. Numerous online tools compile this information and can provide a user with a home’s estimated market value using just an address.
It is important to understand that these online tools can only provide an estimate, meaning a seller should not necessarily list the home at this price. There are additional factors that should be considered, like an appraisal and competitive market analysis; however, these tools are a good place to start.
Formal Home Appraisals
A formal home appraisal provides a homeowner with the most accurate value of the home. Appraisals can cost about $300 to $500, but they are the best way to get market values that are comprehensive and reliable. Appraisers have access to a database of information, including closed sales in the area and common industry standards. An appraiser will use this information to determine the value of the home while making adjustments for its specific conditions and features. Features that influence the value of the home are upgraded kitchen appliances, floors, and paint colors, among others.
Competitive Market Analysis by a Real Estate Agent
Similar to an appraisal, a competitive market analysis (CMA) helps place a value on the home to determine a listing price. A CMA is conducted by a real estate agent and is not as formal as an appraisal, but it is still useful for determining the value of a home. A licensed real estate agent analyzes the home and conducts a written report that establishes the market value of the home. The realtor considers the same aspects as the appraiser, such as the condition of the home and its features. A CMA will give sellers insight into the current value of the home and an appropriate listing price. Realtors can also give insight into aspects of the home that may need repairs or renovations, which will then add more value to the home.
Many real estate agents will conduct competitive market analyses at no cost, especially if homeowners plan on listing their homes with them.
Working with Real Estate Agents
Real estate agents are trained in industry trends, market competition, and analyzing the condition of the home. There is often a discrepancy between the opinions of the owner and real estate agent when it comes to what the home is worth. Listing a home for sale by owner can take 20 percent longer, costing the seller both time and money. Working with a realtor to list a home ensures that the seller will get the most money in the least amount of time.
Selling to Real Estate Investors
Unfortunately, there are downsides to working with a real estate agent. For example, the realtor may not agree with the appraised value of the home. They could demand repairs and renovations that cost the seller up to $23,000 or even more. An alternative to working with an agent is selling to a real estate investor or a real estate investing company. Real estate investors will buy homes as they are, eliminating costs of repairs, renovations, appraisals, inspections, and more. They make cash offers based on the condition of the home, its location, and the year it was built. This option is great for homeowners who are needing to sell their homes quickly.
Whichever method you choose to sell your home, it is important to understand what affects its market value. Determining the right price of your home will help you get the largest return on your investment in as little time as possible.