Knowing how to price your home for sale is serious business. Price it too low and you may be leaving money on the table, price it too high and your home might languish on the market. Your home is the product, but you have years of memories of your life in that home, so you have certain emotional attachments to it. It’s not easy, but sometimes you have to take a cold, hard look at the home as if it wasn’t yours at all. Think like a buyer when you list your home for sale. Finding the right price is both an art and a science and there are quite a few things you should consider before you list your home.
Don’t Believe The Hype
Sellers often say, “My neighbor sold their house down the street for…” There are a few issues using this as the basis for the price you list your home at. First, it’s not all that uncommon for your neighbor to brag a little. We see it quite often. The neighbor tells everyone they sold the house for $250,000, when it reality they sold it for $220,000. Let an agent pull the house up on the MLS for you and show you what it sold for. Second, the neighbor’s house might not be anything like yours. We use comparative analysis on homes in order to find the price – in other words, we don’t compare apples and oranges. Similar homes need to be compared to get the most accurate picture of a home’s value. Lastly, if your neighbor sold your house more than 3 months ago, what they sold it for may not matter at all. We’ll talk about the market in a few moments, but what’s happening in the market now matters more than what happened in the past.
Tax Value From The Appraisal District
We’ve said it before, we’ll say it again – the value of the home according to property taxes is not an accurate way to price a home. If your agent thinks it is, you should run. The appraisal districts in Texas (such as BCAD, the Bexar County Appraisal District) do not appraise the value of the home the same way an appraiser would. The word “appraisal” is the issue – what the taxing authorities do is find a “tax assessed value” not an “appraisal value,” although more people will often call it an appraisal value, so it gets a bit confusing. The object of any homeowner should be to get the taxing authority to believe that the home is worth much less than it is (ie, lower property taxes) and there is even a protest procedure that helps homeowners do just that. Basing your pricing (or your purchasing decisions) off of the tax records is a terrible idea and you should avoid it at all costs.
We know you’re going to visit Zillow at some point. It’s the most popular real estate website on the planet. But, we have to say it – beware the Zestimate. Zestimates are an automated algorithm that calculates what Zillow thinks your home is worth. Knowing that fair market value is based on the current market conditions and comparable sales and that Texas is a non-disclosure state (we don’t make sales price data public), it is next to impossible for Zillow to figure out the value of your home, even with all the computing power they possess. Don’t take our word for it – read what Zillow has to say about Zestimate accuracy in Texas on their own website. Counties like Bexar are rated “one star” which they define as “Tax assessor’s value, or unable to compute Zestimate accuracy” (and you know that the tax assessor’s value isn’t a good indication of value as we just discussed). Even in states where sales prices are disclosed, Zillow shows that their accuracy is not absolute and advises sellers to have an agent show them the value of their home. Zestimates should be used as starting points for the conversation – not absolutes. (This applies to you buyers reading this as well!)
Upgrades and Value
You added granite countertops, top of the line appliances, built an addition to the house, installed a new hot water heater, and built an incredible pool oasis. You loved your home, took pride in it, and paid a lot of money to make it even better with all of these upgrades. Problem is, you’ll never recover that money on a dollar for dollar basis. Much like a car when you drive it off the lot, the value of your upgrades in terms of the sale will always be less than what you paid for them. Kitchens and baths tend to give you the most bang for your renovation bucks, but even then, it’s rare that you will be able to recoup that cost. Provide your agent with a list of all of those upgrades as they definitely can improve the value of your home, but remember – it still comes down to comparable sales in your area. If you’ve over-improved your home, this can be very hard to swallow. Upgrades and additions should be similar to those found in your area. This also applies to square footage – having the biggest home in the neighborhood can often be detrimental to your price per square foot. If all the houses in the neighborhood are selling for the $200Ks, it’s very hard to sell one in the $300Ks even if the square footage justifies a higher price.
The Market Matters
The market is the heart of all pricing. Without the market, we would just be taking shots in the dark at the value of your home. A real estate agent will run “comps” on your home, looking for similar properties in the area (often within the same neighborhood) that have recently sold in order to compare those homes with yours. This is what we call a comparative market analysis (or CMA). It’s not just looking at the recently sold homes though, there a lot of factors to consider. One story vs. two story. Proximity to roads or commercial zones. Possible flood plains. Upcoming zoning changes or city ordinances. How many homes are currently on the market. The condition of your home. All of these factors play into the final pricing of your home and some of them can change the price drastically. Looking at the recent sales in the area, the agent can get a basic idea of what homes are selling for, but they must take into account all of these other factors and use their experience and knowledge to come up with a price. The agent’s job is to sell your home, so they don’t want to overprice it, but they also don’t want to underprice it. Sometimes the market shifts while your home is up for sale too, so price adjustments may be necessary. Look for an agent that can speak about your local market, not just general market conditions city, state, or nationwide. If you’d like to see an example of how conditions can vary from neighborhood to neighborhood, take a look at this post about San Antonio neighborhood homes sales and look at the differences in price growth through the different neighborhoods (from 0.01% to 44.1% – that’s a huge difference).
The final thing to remember is this: price your home right and it will sell. Some homes take longer than others and you should discuss your goals in selling with your Realtor. They can help you weigh your options and can balance the pricing to meet your needs. Need a faster sale because you’re trying to move out of state? Need to squeeze every penny out of the sale to pay for your kid’s college tuition? Want to sell so you can downsize? There are many motivations to selling and knowing what motivates you will help your agent find the best possible solutions for you.
image courtesy of Serge Arsenie