For Sale By Owner – How to Price Your House
How to Price Your House
You’ve probably been giving a lot of thought to the question of “How much can I sell my house for?” That’s a great question, particularly if you’re serious about selling your house quickly. One of the most common mistakes made by For Sale By Owner home sellers is asking too high of a price for their house.
Of course its human
nature to want to be able to sell your home for the most amount of money, but
if the price you are asking is unjustifiably high, and out of line with
existing market conditions, then you are very likely to damage your chances of
making a fast sale, and it can actually have a negative impact on the eventual
selling price.
How a Realtor Would Establish a Price – You Can Do the Same
The method that real
estate professionals use in establishing a realistic market price for a home is
the “comparison approach”. What this means is that the value of your house is
probably very close to the value of similar, or “comparable” houses that are
currently for sale, or have recently sold in your neighborhood.
So this is the first
place that you’re going to look, and you will focus on houses that are similar
to yours. If your house is a 2-story house with 4 beds and 3 baths, then you
want to look at what other 2-story houses with 4 beds and 3 baths that are
similar to yours are selling for or have recently sold for.
Properties Currently for Sale in Your Neighborhood
An easy way to find out
what the prices of homes for sale in your neighborhood are is to go to
www.Realtor.com. At this site you can find every property listed for sale if
it’s listed by a real estate company (no For Sale By Owner on this site).
Drive around your
neighborhood and jot down all of the addresses of all the homes for sale. Then
go to www.Realtor.com and look them up by typing in the property address. Make
note of the property features, try to gauge what, if any, upgrades the seller
have made, and keep record of the price.
Properties Recently Sold in
Your Neighborhood
The price of recently
sold properties is really the most accurate measure of what home prices in your
neighborhood are, because these prices reflect what other people have actually
been willing to pay for the property after negotiating with the seller and
having reached a price that was mutually agreeable.
This data is a little
more difficult to find but here are two sources. The first is Trulia.com. Look
for the “recently sold” tab and then be sure to fill in the property details to
match your home’s description.
Online Sources for Home Valuations
You now have a little
bit of data to begin working with, but the more data you have, the better. Here
are four more sources that will give you estimated values for your home based
on sales data of comparable homes. The first one is at www.Zillow.com.
This is very simple to use. On the home page, in the box labeled “Find Homes”, type in your property address. Zillow will allow you to claim this property as yours, and then it will allow you to update your home facts and list any improvements.
You will then create a Zestimate, Zillow’s estimate of the value of your house. One last source is ElectronicAppraiser. Unlike the other two sources that I’ve recommended which are free, ElectronicAppraiser charges a modest fee for their report. Their report is very comprehensive.
However and will provide you with an
estimate of the current market value, highest and lowest reasonable price
range, neighborhood property value average, comparable sales data, map showing
comparable sales, tax assessor data, lot size, square footage, and a legal
description and sales history.
Calculating Your Sales Price
You now have plenty of
data to work with. You have a list of houses that are currently for sale, so
calculate the average sales price of these homes. You also have a list of homes
that have recently sold in your neighborhood, so calculate the average sold
price of these homes. You still have two more prices to factor in: Zillow’s and
RealQuest’s.
You should now be able
to calculate the “price range” of your home which is in between the highest
price and the lowest price. The most realistic price that you can expect is
probably somewhere near the middle of this range.
If you are satisfied
with this mid-range price, then you want to establish the asking price at not
more that 5%-7% above the expectant price. This is because you can anticipate
that any potential buyers will make an offer at less than your asking price. If
homes are priced well then the final sales price is typically 93%-95% of the
original asking price.
If you initially price
the home at 10% or more above the realistic market price then you can expect a
significant decline in the number of interested parties, as well as the number
of offers. It could result in your house staying on the market for a long time
and developing the stigma that “there must be something wrong with the house”.
Use Common Sense
The methods described
above are intended to be guidelines for establishing a fair market price for
your home, generally follows the methods used by professionals. There can be,
of course, many variables that factor into the price of your home.
So be sure to take these into
consideration. Example,
your house backs up to a busy street and there’s lots of traffic noise when you
sit on your deck, and view out of the master bedroom is of busy intersection.