If you have been reading my blog posts over the years, or even if you have only looked at some of the articles in the real estate section of the newspaper, you are probably aware that home prices have been going up and up and up! And you may be thinking that this is as good a time as any to put your home on the market, take the equity and make a move!
But then you begin to wonder - how do I set a price on my home?
You may decide to call a Realtor to come and look at your home and do a Market Analysis for your home!
You may decide to look on the internet and look at Zillow for the Zestimate!
You may even decide to look at your tax assessment and use that as your asking price!
You may visit open houses and see what homes in your neighborhood are selling for!
You may decide to get an appraisal done on your home!
And you may even decide to ask your favorite contractor or the your next door neighbor what they think your home is worth!
With so many ways to come up with your asking price, you may wonder, how does a Realtor calculate the market value for your home!
Understanding the Realtor's Market Analysis
One of the first things we all learn to do when we get our real estate license is how to do a market analysis on a home! But each Realtor does their slightly differently from each other. There is no absolutely right or wrong way to do a market analysis on your home! But your home is your nest egg! You can't just ask any price you want - because buyers out in the market are savvy, and they have done a lot of research & they know what the market is for a home!
So when you are talking to the Realtor and you are looking at how they came up with the value for your home, ask them how they did their Market Analysis! Some of the answers may surprise you!
Let me tell you a little bit about how I put together a Market Analysis for my sellers!
First, I am going to do a Google search of your home! This gives me a street view of your home (yes, I know, it may not be the most up to date picture of your home or your neighborhood) and it allows me to "drive" around your neighborhood on my computer! This lets me know a little bit about your neighborhood and gives me a feel for it! It also lets me see if your home has been previously listed and any other information about your home!
Next, I am going to check your address in Zillow and Redfin! Why? Both of these sites will give me an automated valuation of your home! I know that these are not always the most accurate way to come up with your home's value, but most likely, you have already looked at these and your future buyers will most likely be looking at these figures as well! I will want to know what comparables these sites are using to come up with your value and whether or not these are the most accurate homes to be used in valuing your home! I will also want to check the accuracy of the Zillow Zestimate in your county or city! Zillow will actually tell me what their median error rate is on the Zestimate! If they value your home at $200,000 but there is a median error rate of 5%, this can be a swing of around $20,000 in value one way or the other! So I definitely want to know that!
Next, I am going to look at your tax record, both in my MLS as well as in the county or the city! Why? Because this will tell me what your current tax assessed value is, what the trend is of the tax assessments have been over the years (since our tax assessments are based on what the sales in your area are doing each year) and I will want to know what next year's tax assessment is to be! In some of the jurisdictions, I can even get a picture of your home! I can even run a search of comparable sales which will include any homes that were sold For Sale By Owner (and never went into our MLS)!
Next, I am going to run a search of what is active, pending, sold in the last 6 months & expired in the last 6 months! Why? Well, I need to know what is active since that will be your strongest competition! I need to know what is under contract but not yet closed - these homes show me just what the market is doing right now! I need to know what has closed in the last 6 months - this will show me how close to the asking price homes in the area are selling for, as well as whether or not the seller paid closing costs! And I want to know what listings have expired - after all, these are the homes that the market has rejected for various reasons - it could be price, it could be location, it could be condition! But we need to know that so we don't make the same mistakes these expired listings made!
Next, I am going to analyze these homes! Why? Because this is what is going to let me know just what your particular market place is like! Real estate is local - even within the broader Richmond area there are lots and lots of very narrow market areas! Each market area is a little bit different in what is sold, how long homes sit on the market, how upgraded those sales are or aren't, if there are distressed sales that are affecting your market area, if there is new construction that you will be competing with! Are the homes you are competing with staged? What additions do these homes have? What is the condition of the homes that have sold as compared to your home? Will you need to do some upgrading to your home to make it attractive to your future buyers? Are there repairs needed to your house - and will you be able to do them prior to listing your home for sale? I want to know your marketplace like the back of my hand so that I can give you the best advice I can about what your home should be marketed for!
Next, I am going to run a search of all homes that are active on the market in your broader market area! Why? Buyers are looking at a lot of different areas - for instance, they may want to be in Chesterfield County, in Area 62 (western Chesterfield) but may be open to Cosby HS, Midlothian HS and Clover Hill HS. So, within your home's market value range, you will want to know what other homes these buyers may also be considering! You should always keep your competition in mind - the buyers are definitely doing so!
Finally, I am going to pull all the information together to give you a range of value! Why? A lot depends on how quickly you want to sell your home! If you have found another home to buy and need to sell quickly, but your market area has an average time on the market of 3 months, you may wish to price your home at the lower end, or even below, the market value so that you can get a quick sale! However, if you have time and the upgrades & condition show that your home is a top of the market home, then you may be able to price it closer to the top price of the market! And sometimes you may wish to price low in the hopes of generating a bidding war! Much depends on your timing, motivation and the condition of your home compared to the others on the market!
There is no right or wrong way to value a home - and, as I said before, each Realtor prepares their Market Analysis a little bit differently! Some agents are very familiar with particular neighborhoods, especially if that is a neighborhood they farm or live in! But the Realtor you talk to should be able to show you how they came up with their valuation and justify the pricing to you!
Thinking of selling your home? Have a question? Feel free to let me know how I can help!