The single most important task involved in selling your house on your own (or with an agent for that matter) is to set the sale price correctly! There is nothing more exciting for a seller than to have multiple offers on their property. And, by having multiple offers you can actually end up selling your house for more than your original asking price when bidders fight for your home.
Before we continue we have to understand a couple of simple definitions:
Market Value- The value of a home in TODAY’S market.
Assessed Value- Used by taxing authorities to determine taxable value only. Assessed value is NOT an indication of market value.
How is Value Established?
The most accurate way of determining market value is through an appraisal. One appraisal method and probably the most appropriate for residential sales is the “Comparative Market Analysis” approach. Using this approach, the market value of a house is based upon recent sales (preferably in the current year) of at least three similar neighboring homes. Ideally, appraisers want to use sales of properties of the same size, age, rooms, condition and amenities. This rarely happens though, so adjustments have to be made talking into consideration what buyers might be willing to pay extra for. Some examples include extra square footage, bedrooms, fireplace, upgrading, parking facilities, swimming pool, lot size, location and so on. You real estate agent will also prepare a comparative market analysis looking for 3 similar homes that have recently sold.
Now with a good understanding of the factors that enter into the valuation and after obtaining an appraisal of your house you are ready to set the list price. Have no doubt about it, your list price is perhaps the single most important factor in your marketing and obtaining a sale. The price you pick should be based on both valuation and an objective assessment of current market conditions. For example, are there a lot of houses on the market in the area? Are houses selling slowly or quickly? Is the economy well? Are interest rates low or going up?
It is usually a good idea to set the price a little higher (5%) than the price you are willing to settle for. This will give you some negotiation room. Getting important market information prior to setting your sale price will give you the best chance of selling your home quickly and efficiently rather than having an over-priced home sitting on the market for an extended period of time causing potential buyers to wonder what may be wrong with the house because it hasn’t sold.