We've all looked at something we own and placed value on it. Our first car, our child's football trophy or our favorite pair of shoes. Is the value we place on these things universally accepted? Probably not. That doesn't matter so much with the trophy or those shoes that we'd never imagine parting with, but what about your home? The value we place on this commodity is very important when we get ready to sell. What can you do to make sure you've arrived at a marketable listing price? Here are a few tips to make sure you don't price yourself out of a sale.
1. Comparables. The first things your realtor, a buyer and the mortgage company financing a purchase will look at in determining what your home is worth are comps. What have homes similar to yours in the area sold for in the past few months? Realtors often hear "the house down the street sold for much less than it should have sold for, so we can't consider that in our listing decision". We have to consider the facts, a home is only worth as much as the market will bear. You may have purchased this home for $200,000 five years ago, but the market is different today. If comparable homes are selling for $180,000, asking for $200,000 will not only price you out of the market for buyers who are looking at similar homes, but if you do happen to find a buyer willing to pay the price, it will be difficult, if not impossible, to find a bank willing to fund the purchase. Banks base their decision on appraisals that, in turn, base their analysis on comparables. What the home down the street sold for is market value. No matter how low it may have been, that is what a buyer was willing to pay, and that is, by definition, what market value is.
2. Market Outlook. Need another good reason to conservatively price your home? Market projections in many regions of the country, including here in Upstate SC, predict that housing prices have not hit the bottom. This means that what you can get for your home TODAY is more than what you may be able to demand in 6 months. The longer your home sits on the market, the less it will be "worth" in the near future. On the upside, if you sell your home at what you consider a LOSS, the home you purchase in turn will also be priced at a similarly diminished price. You're not in this alone!
3. Home Ownership Expenses. The longer your home sits on the market, the more net profit you stand to lose. Every day your home doesn't sell is another day of property tax that will be added to the seller's closing cost. It's another day that you'll pay homeowner's insurance premiums. It's potentially another maintenance bill, whether it's a carpet cleaning, another coat of paint in the foyer, having the gutters cleaned or another seasonal pressure washing of the siding. You also pay interest payments to your bank every month that are not being added to the equity in the property. If you purchased a $150,000 home ten years ago at 5% interest, you will pay approximately $6,000 THIS year in interest payments. If your home sits on the market for a year without a sale, you've endured a loss of $6000 in that year alone that you'll not be able to recoup. The sooner you sell your home, the sooner you can move on to building value and equity in a new property.
We all place value on the things that we love, but here’s where you have to separate sentimentality from reality….. Your home is worth what someone is willing to pay for it. The county’s assessed tax value, your insurance company’s replacement cost estimate, and what you paid for it years ago have nothing to do with what its marketable value is TODAY. How badly do you want or need to sell? There are homes listed today that have been on the market for 3 years. There are homes that sell within days of being listed. The biggest factor affecting this is price. Make sure you’re making good “on paper” decisions. The housing market today is a challenge, but homes that are priced right are the first to go. You don't have to participate in the down market.