Whenever I meet with someone about selling their home, the first thing they ask is, What is my house worth? In other words, they want to know how they should price it.
If you are wondering, “What is my house worth?” you really want to know what the going rate is. I call this “determining range of value.” Range of value goes from a reasonable low price to a reasonable high price of what your property is worth.
Consider these components
Three things come into play when determining range of value: location, condition and price. The saying “location, location location” has been repeated over and over again as the single most important factor in buying real estate, but the fact is, location is specific to an individual’s desire and can’t be defined so easily. Condition and price can.
As a part of the three components—location, condition, and price—location cannot be changed. Condition and price are the only two that are flexible. Location can matter, and to some it might be the most important component, but condition and price will have more influence when determining your home’s range of value.
Spy on the neighbors
When figuring out how to price their houses, my clients often compare their homes to other homes currently on the market. This certainly helps them line up the competition, however, banks want to see what has sold, not what is yet to sell. You need to look at what sold in the past 6 to 12 months. Either your Realtor or your local town clerk can provide that information. The sold properties should be similar to yours in square footage, lot size, and number of bedrooms and baths. Also take into consideration views, lake front footage, neighborhood, rural vs. suburban, and style. There will be adjustments, as even with these guidelines rural homes tend to have their own personalities.
You will soon discover a low end and a high end of the prices of the comparable houses that sold within the last 6 to 12 months. That is the range of value I’m talking about.
Now it is time to determine your listing price. Remember, location is non-negotiable. You can’t do anything about it. The only two factors you can work with are condition and price. If you can’t change the condition of the house, that leaves you with price as your only negotiating tool. If that is all you have to work with, you will likely be in the lower end of the price range of comparable properties that recently sold. If your condition is great but your comparable sales have better locations, then you might be towards the middle of that range. If your location, in comparison to the comparable properties, is more desirable, then you likely will achieve the high end of that range.
So make your comparisons, evaluate your own home, and most importantly, listen to what your real estate agent recommends. Your agent has a good feel for the market and a lot of experience. You might not embrace the price she recommends, but you’ll love her when your house sells.
Now hear this: Pricing above the range of value that you have determined is never to your advantage. Read why in another blog, Pricing a Home so There’s Room for Negotiation.