Where do you start when you are pricing your home?
You’ve heard it said over and over, “It’s only worth what someone is willing to pay for it”. But that’s a circular argument. If you can only price it at what someone is willing to pay you would have to wait until after a homebuyer has bought it to find out what that price might be..
When you are selling your house, you want to set a price that gets you the most possible money, but you also want it to sell as quickly as possible. This requires you to do some homework. You need to find out what a potential buyer MIGHT be willing to pay before listing your home.
Your house may not be worth what you think it is.
It may be a great house. If you have lived in it for a long time or you have inherited it from a family member that has always lived in it then you may be putting some emotional value on the property that just won’t exist for a buyer.
Likewise, you might have put in all sorts of little upgrades and improvements that you think are grand. But when it comes right down to it there are a few basic things that ultimately determine how much a house would sell for. Some of these are:
- The size of the lot
- The square footage of the actual house
- The number of bedrooms and bathrooms included
- The area/neighborhood
Any other upgrades may or may not make your house sell faster. They can only increase the sales price marginally.
Then how do you know what your particular property might sell for?
There are a couple of places that you can start, but, while they can give you a rough idea of what your house is worth, they have some drawbacks.
The first place you might look is your local county tax assessors office
These are the people that look at and value houses in order to set appropriate taxes for them. In theory you could look at what the assessor has valued the house at and you have a price, right?
Not entirely. More often than not, the tax assessor will value a property at a significantly lower price than it may be worth. There are a couple of reasons for this.
Firstly, The Assessors office will usually low ball the value a bit to keep the taxes in an area lower to avoid friction with local property owners.
Second, The Assessors agents rarely get to actually enter a property first hand and often rely on information supplied by the homeowner. This is not always accurate. If a homeowner adds a fourth bedroom or extra bath, it may not be reflected in the current tax assessment.
But it’s a good place to start. You can definitely get a rough idea as to what your house is worth from the local Tax Assessors office.
How much is your house insured for?
Again, at first glance this looks like a great place to find the value of your property. Unfortunately, insurance companies only value a house as to how much it would cost to rebuild it should it be destroyed. This does not take into account the land the house is on nor the neighborhood in which the house is located. While it’s another good starting point, your insurance value would always be way too low.
Your best bet is to compare
Just like buying or selling anything else, the best way to set a good price is to see the prices of similar items. In real estate this comparison is called a “Comparable Market Analysis”, or “Comps” You want to look at the Comps for similar houses in the same neighborhood.
Unfortunately, this is not something you can do on your own unless you happen to be a real estate agent or broker. These prices are listed in your local “Multiple Listing Service” (MLS) and only real estate professionals have access to them.
A real estate agent can pull listings from similar homes that have sold or are for sale in your area, and use that information to put a sales price on your house. The MLS is created by the real estate professionals, and monitored by other real estate professionals. It has a pretty good set of checks and balances, so the information it contains is usually pretty accurate.
In the end you are trusting your real estate agent, and while their information is very good, they ultimately want you to list your house with them so some of them might be inclined to exaggerate what you might get for your property to get your business. Shady real estate agents don’t stay in business long but don’t be surprised if the offers you get on your property are a touch lower than what you expected.
Be honest with yourself
Maybe you have looked at all of the sources above and you have decided on what you might get for your house. Have you been completely honest with yourself?
How old is your roof? Is the AC or furnace on its last legs? Does the basement flood? All of these things will come out with the home inspection and ultimately drive the price of your house down if it sells at all.
If the house is in need of repair, then you have to fix it or sell it at a discount. If you can find someone willing to do the work themselves. Usually this will come in the form of an investor.
Investors aren’t looking for a house to live in. They are looking for a property that they can buy at a discounted price.
While they may not pay what you think, you will usually get a fair price for your house.
Some of the discount on the sales price might even be offset. Often the investors will pay most of, if not all, of the closing costs.