6 Steps to Expert Home Pricing – Start with a Home Value Analysis
- Analyse the market trends, reviewing price per square foot trends and current market absorption trends
- Do a Total Market Overview using all the potential comps (not being selective yet)
- Do a Traditional CMA or Home Value Analysis selecting the best comps
- A complete Home Value analysis, includes a review what the subject home special or unique
- Determine the Range of Fair Market Value
- Determine where in the FMV range (or above it) to price the home by matching the owners pricing goals to the marketing and the representation
An Expert Home Value Analysis starts with a Market Trends Analysis
Before determining the fair market value of a home we suggest checking the recent market trends in your area and neighborhood.
(In the video above we use a product called infosparks to create our Home Value Analysis. but we also use this Market Trends tool which our clients love and rarely cancel.)
To being your home value analysis:
- Price Per Square foot trends, are they(going up, down or staying steady
- Market Absorption, how many homes are properties coming on the market vs how many properties being sold each month
In most segments of the market in 6 to 9 months of inventory is consider balanced. Less than that is considered a seller’s market and more than that a buyer’s market.
The Luxury market home market may have longer time frames and still be considered balanced.
But click here is a Market Trends tool our clients love.
Pricing Comes After a Home Value Analysis determines the range
- Traditional Realtor CMA – You may be very familiar with this type of CMA. Realtors will typical look for recent, nearby sales of similar sized homes and figure out what the fair market value of your home might be based on the these comps. Traditionally, Realtors were told to ignore the homes currently on the market as those listings were not actual comps. However, times have changed. Now we know that even appraisers look a the current listings in an attempt to get a feel for where a property may sell. Consequently whether Realtors are consciously aware of it or not… we are really finding a range for fair market value. Good comps allow for very tight ranges… but even in subdivisions we can see significant variances in the price per square foot of sold comps. IMO this variance happens not just based on a difference in amenities but also on other factors such as marketing, timing and negotiation.
- Computer Analysis – LIke our instant home prices app – While we don’t know what each modeler did when they created their computer algos we can get a good idea of what these algorithms do by examining their output. Generally the computers are attempting to find valid comps by limiting the data to homes which are close geographically and close in size. The issue for most of the computer pricing algorithms is that they don’t all have access to current MLS data. For, instance we know Zillow does not always have MLS data and we know they admit their Zestimates are about 8 percent off. Our computer instant home pricing app does use MLS data and I have found it to be a pretty good place to start for non Realtors. If the 5 or 6 comps are similar to your home you will get a petty good idea of price per square foot in your area. Of course your home may sell for more than its price for square foot if it is superior or if its represented better than the average similar home.
- Total Market Overview – This method frequently sets experienced Realtors apart from their peers. As with the computer algos a traditional Realtor CMA relies on the data used. If a Realtor screens out a sold which sold for a high amount or a home which sold for a low amount, it can impact the price per square foot dramatically. Lets say the Realtor set the filter for 3 months, but a record high sale sold 4 months ago, the CMA might come in to low. With our total market overview we take in all the sales in the last 12 months in zip code, the town and or the subdivision. If we don’t have enough data during the last 12 months we may even go back further to make sure we really have a feel. For instance, in well know subdivision in Carlsbad the homes less then 2800 square feet and the homes larger than 3500 square feet were selling for 20 dollars more a square foot than the homes in the 3000 square foot range. We found this odd but it happened for about 5 sales in a row for a 6 month period. We provided the couple with our Total Market Overview and explained why we felt that although other Realtors were telling them the Fair Market Value of the home was $880,000 – $890,000… we said based on the other “non comps” but very valid sales in the neighborhood we could sell the home for significantly over $900,000… and we did. This is why I have always been a big fan of a total market overview approach. It does not always yield a superior result but sometimes it can yield 2% to 5% more for a seller when combined with proper marketing and negotiating.
- Compare and Contrast – The reality is that most of the time the above methods yield a range for the fair market value of a home. Where in the range a home is likely to sell depends on few things such as the homes amenities, its views, its proximity to schools, and shopping and ball fields just to name a few variables. We have also found that if you are trying to sell your home in the high end of the range homeowners probably need good marketing… and if a home owner is attempting to sell above the fair market value range, the homeowner should be thinking of giving themselves the best chance for that success with, good staging, excellent marketing and very good representation.
Consult with Homeowner(s)
As part of our expert home value analysis, this is an optional conversation in which we find out what makes the property special and what the homeowners goals are.
Don’t Sign a Listing Agreement without Making this Change