What is My Home Worth? Don't be Naive
There's a saying in the real estate industry wrapped around the question "what is my home worth?" that gives you different perspectives depending on which side of the fence you're on.
"If you are buying, it's a house. If you are selling, it's a home" and speaks to personal attachment, motives, emotional and financial investment.
Determining fair market value is the most important part of listing a home if you expect it to sell; one could easily say it's half the battle - the other half being marketing effectively.
Even the most effective marketing won't sell an an over-priced home, though a home listed at the top range of fair market value can sell for more than expected if the marketing is broad, syndicated, involves effective use of social media and the listing is search-engine-friendly.
Fair Market Value is a Range
When Marty, my business partner, and I "comp" homes, we pull data from the most important and reliable source - the MLS or Multiple Listing System.
To determine the fair market value and answer the seller's question of "what is my home worth?" comparable homes, or comps, must match feature to feature having the same number of beds, baths, garage spaces, basements, lot size etc. and a tight local radius of the property in question.
The whole idea is to be as close as possible to the property in question with what the property offers and use accurate data to determine a low, median and highest price analysis with intelligent consideration and regard to the seller's time frame. You may need to sell in a hurry, or can afford to sit on the home for 6-8 months.
Not all real estate agents take comps or CMA's (comparative market analysis) the same level. Many will only use one or two of the MLS data sets below.
- Expired - These homes were over priced and did not sell, obviously overpriced and paints a strong picture of what not to do.
- Asking Prices - What comparable homes current asking prices are in your neighborhood.
- Sold Prices - Perhaps the most important data-set to pull from the MLS, but clearly demonstrates what home extremely similar to yours are selling for.
Pulling these three data sets also clearly demonstrates the level of discount from asking prices buyers can expect. For instance, I just recently the above data for a home I comp'd in West Chester, Ohio and could easily show that homes were selling on average 3% less than the asking price. The biggest discount a buyer could expect based on 17 homes I pulled for comps would have been 4%.
When it comes to selling a home, the idea is to cast a big a net as possible for buyers. If your home is overpriced, buyers interested in comparable homes in your area will skip over or pass your home up. Buyers are very educated these days for the most part, and good Realtors guide them on what a fair price offer should be, don't be naive.
Selling a luxury home has a lot in common with selling regular residential properties with some extra emphasis on certain key items and some special areas of focus.
If you're selling a distressed property, there are definitely some extra considerations and of different kinds to achieve your target net.
Low, Median and Highest Price Explained
Using the three data-sets, a competent Realtor who runs full CMA's or "comps" can now work with the seller about a low, median and highest price range based on their time frame to sell.
The lowest price range suggestions will generally sell the home in the first three months, the median will sell the house in 4-6 months and the highest price range could be roughly 5-8 months and an over-priced home is in danger of never selling.
Your choice of Realtor is going to have a lot to do with your home selling success. Even if the home is priced correctly, the agent's preparation and marketing can make or break your goals.
Bad Ideas Regarding Your House Value
Your neighbor's home is priced high, so yours should be too. Incorrect, even if the homes are side-by-side, age differences, views, lot size, differing features, square footage - your neighbor's home may look a lot like your home at first glance, but could be entirely different when it comes to fair market value.
Listening to what your friends and neighbors say your home is worth. First of all, unless they are real estate agents with access to the MLS and capable of running professional comps, their opinion has as much value as mere speculation. It's nice that they want to encourage you, sure, but don't be naive.
"I put X amount into this house and I need to get it back out" i.e. you spent ten large on high-end expensive kitchen upgrades or 7 large fixing up the bathroom with the ultimate in high end finishes. Hate to burst your bubble, but that only creates better appeal with buyers.
While it doesn't justify over-pricing, your spectacular upgrades can justify the higher price range that the comps suggest. Just stay within the range the comps suggest and you will sell your home. Of course, provided your Realtor has an excellent, dynamic custom marketing plan for your home and doesn't just slap it up on the MLS.
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