The answer to this question may be the key to the sale of your home. Price it right and you maximize the return on your investment and have a quicker, smoother sale. Price it incorrectly and you will most likely leave some of your money on the table or risk losing potential buyers.
There are three essential steps that are involved in determining what price to market your home for. First you must determine what the market is, second your place in the market, and third the market's direction within the current trends. Leaving out any of these steps, will likely lead to frustration and lost profits.
Step one - determine what the market is, by looking at what is available for sale and what is selling, what size, layout, number of rooms, neighborhoods, price ranges, how long on the market, what amenities, and then what is not selling. This will give you a broad view of the market and your competition, and likely clues as to where you will have to position your price to sell.
In step 2 you will need to zero in on your position within the market. You do this by taking the pool of homes that have recently sold that are similar to yours and making adjustments to their price based on comparisons of what they offer versus what your home offers. When your home offers something that the comparable home does not you add the value of that feature to the price that the other home sold for. In essence what you are saying is that if the other home had this item, it would have been able to sell for X number of dollars more. Conversely if the other home had a feature your home does not, you would subtract that from the sales price of the other home.
To properly make the price adjustment you will need a large pool of homes and then you can compare the value of an item by isolating the prices of homes with a difference in that feature. You can do this for any individual feature or group of features and will want to consider such things as differences in square feet, layout, number of rooms, number of beds and baths, quality of construction, maintenance of the home, the lot, location, school system, accessibility and the neighborhood and any other factor that can effect the salability of the home.
The final part of this step is to take the information about the similar homes apply the adjustments and determine what the market is willing to pay for your home, versus the competitive homes that are on the market now. You should now know whether you need to be priced lower or could sell for more because you have additional features, or will just have to wait until the competitive home is sold before yours will sell.
Step three is to make adjustments for the current trends in the market. The market is not static and may make significant corrections within a very short period of time. To determine the current trends, you will need comprehensive information on the current sales, available homes, and of historic sales versus available homes. The goal is to establish relationships between the number of homes, the number of sales, the sales prices, time on the market and then adjust those trends based on what is happening in the economy that will affect the curve.
Unfortunately, since most people don't gather actual data to determine where the current trend is, they are usually months and sometimes years off. This results in you having a home on the market that looks to be priced right, but doesn't sell.
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