Home value: How much is my home worth?
How much is my home worth? That, of course, is one of the most important questions people selling their home ask when setting the price. It’s also a very complicated question with a lot of factors to determine the answer. The short answer is much less complicated. It’s the price that an able buyer is willing to pay. So, it depends very much on the condition of the market.
A wise realtor once said, “Every house will sell for the right price.” But what is the right price? Again, it’s the price that an able buyer is willing to pay. When selling, we don’t want to set the price on the house so high that no one will make an offer. That will just help sell everyone else’s house while we put in a lot of fruitless labor showing, cleaning, staging, marketing, and sweating without results.
On the flip side, we don’t want to set a price that is lower that what the house could have sold for because this isn’t a non-profit act of charity we’re engaged in, either. It’s a business with the goal of ensuring sellers get the absolute most they can for their house. Unfortunately, determining the right price is more of an art than a science. But it is quite possible to predict with a fair amount of certainty what the house will sell for, and what will cause it to just sit on the market and never sell.
In most cases, there are seven key components to determining the right price.
- The current market. In other words, what are houses of similar size, qualities, and amenities selling for? This is the most critical component. A realtor has access to an incredible amount of data regarding home prices and recent listings. Let them show you everything that has sold, how long it took to sell, how many didn’t sell, and any other relevant information needed to help make the best decision in setting the selling price. With enough comparisons, you should be able to quickly find the right range from this research in order to predict what price your home will sell for.
- Strengths. These are the “selling points” for your house. What is about your house that makes it more valuable? Perhaps you have a jet pool or a shower in the master bath, a bathroom on the main floor, stainless steel high quality appliances, a new roof or HVAC, or hardwood floors. The list is endless. You will want to include anything that makes your house stand out when setting the price for your home.
- Weaknesses. Unfortunately, many houses have needs that affect their price. Perhaps the house only has one bathroom, lacks appliances or has ones that are old, needs new flooring, or will require updating. It’s important to identify these issues early in the process in order to correctly adjust the price when the house is listed (or if possible, give you the chance to address them yourself in order to increase the value of the house before it is sold).
- Amenities. These features may not directly affect the price of the house but will be crucial to helping sell the home much faster. Some examples of amenities include a garden shed, great landscaping, an open floor plan, a larger deck than is typical, or a swimming pool. As with strengths, the list of potential amenities is endless. Your agent can help you determine which amenities add value and which ones might not.
- Upkeep. Let’s face it, every house has needs, and unfortunately these don’t add to the value of the home. Sometimes your home will include elements that you won’t be able to recoup your money for, such as an expensive kitchen remodeling job or a beautiful in-ground pool. What will absolutely not work in setting a price is to take an approach that adds up what you paid for the house plus maintenance and remodeling costs. The market, the appraiser, and ultimately the buyer, won’t consider those costs in the analysis of the home’s value. It is often a disastrous discovery to learn a buyer has offered to buy your home at far less than you determined the value to be based on the work done. I always want to know what my clients spent so that I can share that information in order to help a buyer or appraiser understand the value of what they are viewing. However, it’s a hard, cruel fact that what we spend and what we can get may not line up perfectly. Let’s face it. You probably didn’t put that new kitchen in with the goal to “sell it for a profit.” You put it in so you could enjoy it. The same goes for the in-ground pool or the main floor master bathroom or the new 2-car garage. And you did enjoy it, so don’t feel guilty or waste time on buyer’s remorse. It is what it is. But also avoid the mistake many sellers make of overpricing a home. It will just sit on the market indefinitely if you insist or recouping your money. Buyers won’t cooperate, but it’s not personal. The market is impersonal. No amount of stubbornness will change that fact. The best approach is to accept the loss and move on to the home you desire.
- Market Analysis. Next, you will want to analyze your competition. Look at other houses currently on the market to see what is similar in design and price. Make a mental note of how many days those homes have been on the market. If a house very similar to yours has been on the market 200 days or more and you list yours for the same price, you very likely are going to experience the same results as the owners of that house. Use those property listings as test cases and learn from them.
- Time Allotment. Finally, what are your driving factors for selling? Do you need to sell quickly because you are moving out of the area and two house payments would be stressful? Can you afford to wait for the “right buyer” without being negatively affected by the process of showing your home to prospective buyers? The answers to these questions should play the biggest part in determining the price of your home. Setting a price at the high end of the range the market will bear increases the number of days it takes to sell the house. Setting the price too low opens you up to more buyers who can afford and will consider your house. It is a tradeoff. Remember, sometimes it costs more to hang onto a house while you wait for the “right buyer” with expenses like utilities, yard maintenance, mortgage payments, and in some cases, unexpected repairs when the home is vacant.
So, in conclusion:
- Work with your realtor to understand the current market.
- Work with your realtor to determine the strengths, weaknesses, and amenities of your home. All of these areas will impact the final price, whether it increases or decreases that value.
- Don’t get bogged down with trying to recoup the money you spent on maintenance, upkeep, and remodeling. Buyers won’t be willing to pay you back for those costs.
- Find houses similar to yours and compare the prices as well as the length of time those properties remained on the market.
- Decide how fast you need to sell the house and whether you can afford the expenses that come with waiting for the “right buyer.”
For determining your home value and worth, and for realizing its potential, contact Deborah Korlin at 865-765-6157 or email her: firstname.lastname@example.org.