M2. LESSON 1
PRICING YOU HOME
What is the right price?
TWO OF THE BIGGEST MISTAKES FSBOS MAKE IS EITHER PRICING TOO HIGH (USUALLY) OR PRICING TOO LOW (OCCASIONALLY). THIS SECTION WILL HOPEFULLY KEEP YOU FROM MAKING EITHER ONE OF THOSE MISTAKES.
Buyers are more sophisticated than ever before. They come into the transaction knowing as much, or more, about your property than even you — thank you, Google. They also know what your house should sell for and will not pay more. As a matter of fact, many FSBO buyers are looking for a deal.
There’s an adage when it comes to selling your own home. “Two people can’t save the same dollar”. Of course, that’s referring to commissions.
Buyers know you’re not paying commissions to an agent, so they expect to save that money. So do you. Don’t be surprised if offers start at least 10% below your asking price. This is to compensate for the fact that you, the seller, aren’t paying real estate fees. Have your comparables and any other information you have ready to defend your price.
There are three methods to pricing your home:
1) Have an appraisal done by a real estate appraiser
2) have your home evaluated by a real estate agent
3) arrive at a price using your own methods
DETERMINING THE SALE PRICE
The first thing we need to do is check out other houses in your area.
Examine past sales of houses comparable to yours in size, age, condition, and location.
Then, we need determine the state your local market is currently in.
- Do a google search for “your city real estate forecast [the year]”.
- Then search “is it a buyers or sellers market in your city [the year]?”
- From these two searches you will be able to determine the current state of your local market.
- Now we need to find recent sales of comparable homes in your direct neighbourhood.
On streampsl.com there is a tool you can use called “My Comparables” that will provide you with properties that have features similar to yours. You will be able to see the average sale price, the average sale price per square foot and how close the comparable is to you. Comparables will give you a baseline against which will help you establish a sale price. How similar homes in the area have sold: How much are people willing to pay for a home like yours in your neighbourhood?
Determine the price range and ask a figure as close to the bottom of that range as is comfortable for you.
https://www.honestdoor.com/ is an invaluable resource for this if you happen to live in the following cities: Beaumont, Calgary, Cochrane, Edmonton, Leduc, Red Deer, Sherwood Park, Spruce Grove, St. Albert, and Winnipeg.
Here is a list of the elements that need to be taken into account when pricing:
- Location, location
- Type of home
- Curb appeal, your home looks attractive from the street
- Year the home was built
- Number of rooms, bedrooms and bathrooms
- Square footage of the home
- Square footage of the lot
- Heating and cooling systems
- Number of parking spots
- Flood zone status
- Condition of the utility services and fixtures
- The type of foundation
- The condition of the attic and basement, heating and air systems, walls, windows and doors
- Extra amenities, such as a pool, deck or fireplace
- Any structural improvements or repairs
- Any additional repairs or improvements are needed
- The condition of appliances
- Signs of damage that would compromise the structural soundness of the home
- How does my home value compare to other homes in my neighbourhood
- What’s the market temperature? Is it a hot or cold time to sell?
- Mortgage interest rates
- Supply and demand
Conducting your comparative market analysis
Once you have researched home sales in your local area, comparing current selling prices with past selling prices, you will be able to document this information and analyze it. Through is type of research you will gain a greater understanding of your local market and how your home is currently positioned.
How similar homes in the area have sold: How much are people willing to pay for a home like yours in your neighbourhood? Are there many foreclosures in your area? This will give you a lot of insight into how desirable your home may be—or how much someone might be willing to pay.”
Employ an “apples to apples” approach. Think about which properties would interest a buyer if yours weren’t available. Look for similar size, location, condition and upgrades. You’ll need to adjust for differences between your house and the comparables, such as adding value to the comparative price if it has more bedrooms than your house or subtracting value if its interior is outdated, for example. After adjusting values, look at your highest and lowest comparables. A rough estimate of your home value would most likely be somewhere in the middle.
Some uncontrollable factors that will affect your home’s final market value:
- The local economy — in a recession or not
- Mortgage interest rates — high interest rate will keep some buyers from committing
- Time of the school year — expect to receive more or fewer offers depending on the time of year
- Supply and demand — a wave of houses on the market means you have competition. On the other hand, if it is a sellers market, with more buyers than homes for sale, raise your price accordantly
When settling on the price, pick an odd number. Everyone asks for $XXX,900, pick $XXX,987 instead.
Use buyer incentives to help you sell faster and help justify you pricing — such as having a professional property inspection completed prior to receiving offers.
It helps to be seen as the bargain! If there are similar properties like yours on the market right now, set your price just below them.