When sitting down with your Realtor’s® to analyze comparable homes and recent sales, It’s tempting to pick the highest price and say, “Let’s list it here.”
As a home seller, the science is choosing the right price at which your home will sell by analyzing your local real estate market conditions. You want the highest price and the buyer wants the lowest price and the sales price will end up somewhere in between. To best determine market value, you have three critical tools: CMAs, appraisals, and using an experienced Realtor’s® knowledge of the market.
A comparative market analysis (CMA) is comparison of similar homes for sale and recently sold homes in your neighborhood. CMAs are composed of data compiled for comparison by your Realtor’s® multiple listing service (MLS.) Realtors® use CMAs to illustrate the range of homes in the marketplace and the features that make them unique, including age, location, number of bedrooms, baths, room sizes, updates, condition, etc. As a seller, you should be able to see where your home fits – in the top or lower price range of similar homes. Buyers also get CMAs from their practitioners to help them understand the selection in the market, and to prepare them to make an offer on a listing. CMAs are typically used by buyers and sellers before an offer is made.
An appraisal is a market analysis performed by a professional appraiser using a variety of sources, including MLS data and conforming loan formulas. Appraisers most often work for lenders to determine market values, so that lenders can weigh the risk of making a loan to a home buyer. Appraisals come after an offer is made when the buyer applies for a loan. Even though the buyer pays for the appraisal, the lender uses it to determine whether or not to make the loan at the contract price. Buyers have one advantage over sellers when it comes to appraisals – their bank has the last word. If the appraisal doesn’t meet the contract price, the bank refuses to make the loan, unless the seller agrees to a new contract price. One can hire an appraiser to help determine at what price a bank will loan a buyer money to buy his or her home.
It’s your Realtor’s® expertise in the local market that can connect the numbers with other market conditions. Realtors® will help read the market, and help choose the right price, based on current trends analysis and news. Experience with current customers tells them how buyers are behaving today. Are they paying top dollar or low balling offers? Their network of contacts provides valuable intel into where other sellers have run into problems. He helps avoid the same issues. For example, how stringent is the current lending environment. Your Realtor® knows his clients motivation, what he needs to get out of the home financially, and under what terms. While it’s her job to help you meet your goals, it’s also the Realtor’s® job to help a client face the realities of the current marketplace. Their job is to help price a home high enough that it sells quickly, without sitting on the market longer than the homeowner can afford. By the same token, his job is to make sure that a home isn’t listed so low that profits are left on the table. And that’s where the art of the deal comes in – putting all the moving parts of the market together.
Ultimately, you are the one who will choose your listing price, based on your understanding of all the data. You can’t list and sell your home for any more than a buyer is willing to pay. And that makes pricing it right both an art and a science.
Todd Harvey is an experienced Realtor, Broker and Sales Director at Better Homes & Gardens Real Estate the Masiello Group. The office is comprised of over twenty five professional agents servicing all of your real estate needs and is conveniently located on Route 115 in North Windham.