PRICING YOUR HOME
Your home has many values: one established by the municipal tax assessor, another established by the real estate appraiser, and a third established by you. It also has a value determined by prospective buyers depending on their needs, wants, and financial capabilities. The selling price of a property is not necessarily determined by any of these factors nor by any financial needs the seller might have, what the seller may have paid, the cost of rebuilding it today, what the neighbours feel it is worth, or what other Realtors might say if they’re bidding to get the business.
The selling price is determined by the marketplace. The single greatest factor in attaining top market value for the sale of a property is that property’s initial asking price.
COMPARATIVE MARKETING ANALYSIS (CMA)
One of the most important things a Realtor will do is collaborate with a seller to decide on the initial listing price. Your Realtor will research the market and perform a Comparative Market Analysis or CMA. The CMA compares your house to similar properties that have recently sold and properties that are currently listed for sale. CMA’s consider elements such as location, pricing, features, lot size, and property condition. A comprehensive CMA and analysis of relevant sales often points to a market price suggestion for the subject property.
There are a host of factors and events a good Realtor will consider to interpret the information when reviewing the statistics and sales to determine the story they tell. How long did it take for this comparable property to sell? Were there any price reductions in order to facilitate the sale or did it sell in multiple offers? Did it sell after having been withdrawn from the market, repositioned, and reintroduced into the marketplace? Were there unique features in this house that the marketplace either rejected or paid handsomely for? Realtors should shed light on how these sales impact the sale of your own home and conduct their own independent analysis to gauge all relevant market forces. Justified pricing considerations and recommendations are the outcome.
SPECIFIC FACTORS CONSIDERED BY CMA’S
- Size & Lot
- Unique Features
- Supply & Demand
- Interest Rates
- Seasonal Demand
- Price, Location, Features & Condition
- Market Activity
- Time on Market
- Price Changes, Expiries
Buyers know the marketplace
Buyers and their Realtors typically view a great number of properties before they make an offer. Accordingly, they become experts within the marketplace and understand if a new listing is priced appropriately or if it is priced way out of line. If a new listing’s positioning at launch is wrong buyers may look at it but will back off because they cannot see the value, feel it is overpriced and can infer that the seller has unreasonable expectations. Why waste their time? They would rather bid on a property listed within its fair market range.
When establishing an asking price for a property a good Realtor will guide sellers to strike the right balance between a seller’s need to receive top market value and qualified Buyers’ reasonable expectations to attain fair value for their purchase. Pricing a home appropriately right at the beginning is a critical component of not only getting it sold fairly quickly but also getting it sold for very top market dollar. The longer a home languishes on the market, the more discount buyers expect to receive. With time, a buyer’s attitude shifts from ‘How much do I have to pay in order to get this house?’ to ‘What can I pick it up for?’.
Do your best to view all of the comparables from an objective, impartial perspective. Will the price you are considering compel buyers to act or make them shy away until the price comes down?
In summary, there is no exact science to determine a list price or the home’s value. Having an open dialogue with your Realtor and realistically assessing all of the relevant sales information should lead to the best suggested asking price for the property and generate top market value upon its sale.