Updated 11/20/16, originally published 8/8/15
- List your home as close to the fair market value as possible
- Tax assessments, appraisals and even the listing price is not the same as your home’s value
- Your agent will provide you neighborhood sales data to demonstrate your home’s value
What the Price is NOT
There are many different sources that in some way evaluate a “price” or value of your home. The listing price is the only one we control, and we will talk about it in a minute. Let’s first talk about the fair market value of your home by describing what it is NOT.
TAX ASSESSMENT ≠ PRICE
The tax assessment is for tax purposes only, and has little to do with a property’s actual market value. Sometimes it is close, other times it is wildly high or low (if high, I recommend appealing your next year’s tax assessment to get your tax burden down – and don’t forget your Texas Homestead Exemption!).
APPRAISAL ≠ PRICE
The appraisal is for lender purposes only. Your house will probably be appraised by a buyer who is getting financing. The appraisal is an important part of the buying process, but it is NOT the final determinant of your home’s fair market value, and final price.
LISTING PRICE ≠ PRICE
The listing price is for marketing only. This is the key one! What you ask for your house is NOT about your home’s actual value. The asking price is a marketing tool. The goal is to price your home right to get the most people in your door and interested in your home. Once you’ve captured their interest, then the offer process begins during which you will settle on the actual price. It is often higher or lower than your original listing price.
So what is my home’s actual value?
Your home’s real market value is defined as only one thing: The price at which a buyer is willing and able to pay for your home and you are willing and able to sell.
We cannot force a price on a buyer. It depends entirely on their means and motivation. The goal should be to market your home well to get as many buyers inside the doors as possible, and have a home condition and price competitive with the others on the market.
The Listing Price
OBJECTIVE: Get the most foot traffic.
Your Listing Price is the #1 best and most important method of marketing your home. When a buyer is deciding between 30 similar homes which 10 they want to spend their weekend viewing, a few thousand dollars can be the difference between seeing your home or not. Buyers never see homes that don’t make that list, and no matter how awesome your home is, they will never know because they never walked through your door. A competitive listing price is the most important element to getting your home sold quickly and for the most.
Market Analysis (CMA)
So, what is a good listing price?
The best listing price is as close to the fair market value of your home as possible. This is where your target demographic is looking.
How do you determine the fair market value of my home?
We arrive at the fair market value by looking at properties that are comparable to yours that have sold in the last six months, expired in the last six months, or are still active. Remember, our goal is to get the most qualified buyers inside and excited to see your home
These show us the terra firma of reality, which homes are selling and for how much in your area. You want your listing price to be firmly within this range.
ACTIVES / UNDER CONTRACT
These are your competition. Remember that buyers look at an average of 10 homes, so you want to be sure your listing price is in the top ten or better of all the current active comparable homes. These listings also represent only the hopeful wishes of their owners, not necessarily the reality of what homes are selling for. This is where having the REALTOR® sold data is helpful. It shows not what sellers would like for their home, but what they are actually getting.
This is the no-man’s land of homes. These are homes that did not sell during the term of their listing agreement, often having been on the market for a year or more. They may not have sold because of the condition of the property, or because they were overpriced. You want your home listed well out of the range of most expired listings.
To do a proper market analysis, the current Condition of your home would need to be evaluated, to see how it compares either favorably or unfavorably to other homes that have sold recently nearby.
Normally how it works is that I would come by your home and meet you and your family. Then we would walk through the home, getting a feel for what features it has and doesn’t have, and then sitting down around the table to go through the raw data of the market analysis. I can usually at that point come up with a recommended listing price based on the features explained above, as well as walk you through the Seller’s Net Sheet to determine how much you would earn from selling your home.