Pricing Sources (Besides Agents)
For homes currently on the market:
If you research homes currently for sale, remember, it's the selling price of a comparable home, not the asking price that is most important in determining the probable selling price of your home.
1) Start by visiting open houses that are in the price range you’re contemplating. Look at other homes in a true, objective sense–just like buyers will when they’ll be touring your home.
2) Most individual agencies (and some MLSs - Multiple Listing Services) now allow the public to view homes for sale via the internet. It’s not perfect, but it’s a lot better than making a comparison between your home and some cheesy home picture in the newspaper.
3) The best site to see all the homes in your area is on Realtor.com.
For homes that have sold:
1) Most local newspapers list sold prices - little late to consider if you’re going on the market next week.
2) County deeds offices record all sales and many are internet accessible. Do searches for the assessor or auditor for your county. Many list the sales history of residential property.
3) Some web sites provide sale prices. Key in an address and get a map of recent selling prices.
SearchSystems Low cost access to many public databases US and Canada
Records Has sales data but could be months behind in updating
MelissaData Sales activity and price trends for an individual zip code
City-Data Displays number and average selling price by town and by zip code
Automated Pricing Appraisals:
Several companies provide a free or low cost estimate of your home’s value using automated evaluation techniques. They are all questionable. They don’t consider factors such as views, lot location, updating, condition, curb appeal, etc. that your home or the comparable properties offer.
Automated estimators have the most success with homes in a neighborhood of similar homes – cookie cutter subdivisions. However, as these housing developments age, comparisons become suspect as owners make additions, finish basements, install new kitchens, etc, making this technique subject to serious inaccuracies.
Here are some value-estimate sites (some free)
These display values through their own estimation techniques. After looking up a property, see how your own home is valued from the site. Still feel comfortable using the site?
There are key prices that will affect your showings, and ultimately, the sale. These “price points” are round numbers, including $150,000, $200,000, $250,000, $300,000, $400,000, $500,000 and $1,000,000. If you are considering an asking price that is very close to any of these numbers, be advised that these are key prices to be under.
These Price Points represent mental blocks for many buyers. They simply have a hard time going over these price “thresholds.” In other words, you'll get a LOT more showing activity at $249,900 than you do at $252,500, yet the difference is only $2,600.
Buyers use the same retail mentality they have acquired from years as a consumer. Shop for a shirt and the pricing is $29.99, $39.99 and on. You don’t see them priced at $31.95 or $50.99. The same pricing logic holds true for a home.
Even if a fair asking price for your home is just over one of these price points, be smart and stay below it. Then stay close to your asking price when an offer comes in. You’ll have less room to negotiate, sure, but you will get offers from people who would never consider looking at a home over a key price point.
Suppose your home could be priced at $205,000. So the buyers limiting themselves to an upper end of $200,000 will probably never see your home. Your home probably will compare very well with those near, but under $200,000. Price it to sell at $199,900. Conversely, buyers using $200,000 as the low end of their range will see your home but it won’t compare favorably with those they view as they as they view those higher in price past yours – assuming of course, those homes are priced realistically.
"Price range" is a term that relates to the low and high parameters of the buyer's' home search. If your house is posted on the internet, most buyers will see your home when they search for housing within their price range and yours is in that range. The computer search will only return houses exactly within this range. Consider the examples below when deciding on an asking price.
For homes priced up to $300,000
People looking below $300,000 typically look at homes in a price range that almost always ends in $10,000 increments. For example, they might look in the $150,000 to $170,000 range, $200,000 to $230,000 range, etc.
When priced from $300,000 and up
Buyers for homes in the higher price ranges typically look at homes in large price ranges that span $50,000, $100,000 and more as the desired price limit increases. For example, these buyers might look at houses from $300,000 to $350,0000 or $700,000 to $800,000. The range of prices increases dramatically when properties exceed a million dollars in asking price.
When priced just above a Price Point
Suppose your home could be priced at $204,900. Buyers limiting themselves to an upper end of $200,000 will probably never see your home. Your home probably will compare very well with those near, but under $200,000. Price it to sell at $199,900! Conversely, buyers using $200,000 as the low end of their range will see your home but it won’t compare favorably with those they view that are higher in price than yours – assuming of course, those homes are priced realistically.
There are many factors that play into setting an asking price; the current market, recent selling prices, consumer confidence, whether we’re in a depression, the neighbor’s in-laws just started parking old junkers in the front yard, a tornado just wiped out the neighborhood, etc.
Realtors and appraisers use comparisons:
Both rely heavily on similar homes in the immediate area that have recently sold to determine a home's probable selling price. It's that simple. If your house was built within the last 20 years it will probably be relatively easy to find comparisons. Most subdivisions were constructed with just a few models. Homes there are typically similar in value with a limited number of models have a tighter selling range that makes it easy to find valid comparisons.
As subdivisions age, upgrades, additions and a multitude of changes work to differentiate one house from another. Older homes were often built on a custom basis within a neighborhood and require a seasoned pro (Read: Realtor) to help set a price.
Average annual increase:
When comparison homes are hard to find, even experienced agents rely on the average annual increase to estimate a value (think log cabin). For instance, if local prices increase 3% one year, 7% the next and then 4%, simple addition gives you a rough appreciation increase of 14% over these three years (actually 14.6 is you’re really geeky about this). This is valid for a ballpark valuation covering a short time period in a stable market. However, one must be careful here. There are a lot of factors – improvements, condition, and market trends–that can distort “average” increases. And the question is, how do your maintenance responsibilities and upgrades compare to your neighbors?
How prices influence selection:
Decide on the basic price range you should be in. Here are some techniques to consider that could help you get more showings if your home is selected from a list of many. The buyers wanted to see homes priced from $220,000 to $250,000. Only the prices are show below in order to illustrate the point.
Note how 3 and 6 are both very odd prices. Builders typically do that. It gives the appearance of an exact price derived from careful cost calculations (aren’t we impressed…).
If the buyer's agent knows his clients favor new construction, homes 3 and 6 may make the cut. However, number 6 happens to be a four-year-old house. The savvy listing agent recommended this price to the sellers of number 6 since it gives the appearance of being a builder's new house and possibly this price may generate more showings. Homes are often clustered under a key “price point”, like here at just under $250,000. Notice number 11. By having the house priced a thousand dollars lower, this "price" helps the home stand out from the crowd at $249,900.
Computers influence asking price:
A buyer's price range is almost always input when searching for homes on the computer (like $220,000 to $250,000 or $350,000 to $400,000). Note that houses priced right on an even $10,000 number like $250,000 will be on the list for buyers that specify that amount (like $250,000 to $280,000) as the low end of homes they wish to view as well as those looking from, say, $220,000 to $250,000.
Not a biggie, and it’s recommended that it’s better to be a little under, at say, 249,900 than at 250,000.
Price close to value:
Usually one should set the price slightly higher than it's value – to create a realistic and attractive asking price. This allows a little room for negotiating, but it also creates a chance for a full priced offer.
In a depressed market, set your price right on value, as price becomes the dominant issue among buyers.
The closer you are to the actual value with your asking price, the more you'll look attractive to the buyers touring your home.
The art of setting a price is not rocket science. Even experienced agents sometimes resort to the SWAG method (sophisticated wild ass guess) for pricing tough properties.
Don’t be afraid to spend a lot of time determining your price; it is the most important criteria for getting an offer. Price relates to condition, to location, to market conditions, etc.
Agents may skew their recommendation:
A huge mistake owners make is to list with the agent recommending the highest asking price. Some agents are known to recommend an inflated price. They’ll look good in the eyes of the owner, but are said to be "buying" the listing. Use the recommended price that makes sense, one that can be supported by logic and recent comparisons of home sales - not the price that makes you smile.
Run from the agent who says (without you pushing for a higher asking price), “Well, we can always try a higher price – and if it doesn’t sell, we can lower the price.” Yeah, and then it’ll get stale on the market.