Pricing Your Home - The Asking Price
Pricing your home is one of the most important steps to the home selling process. If you get this wrong, none of your other efforts will matter. On the other hand, if you price your home effectively, you'll be more likely to have a quick sale.
Many home sellers set their asking price based on what they paid for the home. But this is rarely an accurate pricing strategy. In fact, if a lot of time has passed since you bought the home, the value may have risen or dropped significantly. So if you want to sell the house quickly, you need to base the asking price on current market values.
This brings us to the next logical question home sellers usually have. How do I know what my home is worth in the current market? If you've hired a real estate agent to help with your sale, then the agent will help you determine the price. But if you're selling the home on your own, you'll need to do your own research. Basically, you need to dig up data from recent, comparable sales in the area. Real estate agents refer to these as "comps" for short, and we will discuss them next.
What Makes a Good "Comp"
Using comparable sales is a good strategy for pricing your home because it's based on actual selling prices, not asking prices. You will look at similar homes that have sold in your area recently, and you will use this data to help determine your own asking price. And that last sentence contains all the key ingredients of a good comp:
- It must be recent data. The more recent, the better. Home values are constantly rising and falling, so you need to set your price on current market values.
- The previously sold homes should be similar to yours in size, features, etc.
- The previous sales should be as close to your neighborhood as possible. Values differ from one part of town to another, so use local data.
Of course, how much data you find will depend on how active your real estate market has been. If you're in a busy market with plenty of home sales, then you should be able to find a lot of comps to help with your pricing strategy. If the market has been slow, there won't be as much sales data to look at.
Where to Find the Data
The next question is, where do you find recent sales data to help you price your home for the market? If you're using a real estate agent to sell your home, he or she will do this homework for you. If you are selling the home on your own, you'll need to dig up the data for yourself.
Thankfully, the Internet has made this process a lot easier. There are many home-value websites online today, where you can get a ballpark estimate of what your home is worth. They all crunch their data in slightly different ways, but they base their estimates on the same thing — recent, comparable sales in your area. For instance, you can use one of the tools listed in the upper-right section of the website to get a pricing estimate for your home.
A home appraisal is also a good idea, if you are selling the home by yourself and need help setting the price. You can hire a professional home appraiser to visit the property and determine what it might be worth in the current market. He or she will factor in the upgrades you've made to the home, the location, recent sales data, the level of activity in the local market, etc. At the end of this process (which usually takes 1 - 2 hours), you'll be given an appraisal in writing, and you can use this to justify the asking price when you sell the home.
Asking Price vs. Selling Price
It's important to realize that it's called the "asking price" for a reason. Just because you're asking for a certain price on your home doesn't mean you'll get it. If you're in a buyer's market, you might end up with less than you're asking. If you're in a strong seller's market, you might experience a bidding war that drives the final price above what you're asking.
This is why it's so important to understand the kind of market you're in, before trying to sell your home. And it illustrates the importance of proper research when selling a home.