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 Learn How to Price Your Home in a Buyer's Market
By: Jeff Morrow
Fri, Mar 14th, 2008 2:37 pm

Learn How to Price Your Home in a Buyer's Market

Pricing your home is both an art and a science. It is probably the most important decision you and your real estate agent will make. This is especially true as the hot housing market turns from a seller's to a buyer's market. To be comfortable setting the listing price for your home, consider these key factors.

1. Think Like a Buyer Buyers will look at your home with impersonal and calculated eyes. They won’t have an emotional attachment or your personal interests in mind when they make an offer. Regardless of weather the overall market favors the buyer or seller, the buyer will want your home at a fair market price. They are not considering how much you paid for the home, the value of the memories that you have in it, how much cash you need for to close on your next home, or how much time and money you have invested in your home's landscaping, bathroom updates, painting or other improvements. When you first decide to sell your home, it's no longer your home. It belongs to the buyer with the best offer for you. Emotional detachment from your home will help you see your home the way a buyer will be looking at it. Brush up on more selling advice.

2. Start with CMAs Invite a few real estate agents to work up a CMA (Comparative Market Analysis) for your home. A CMA compares the price of homes recently sold, homes that were on the market but didn’t sell, and homes currently on the market to give you and your real estate agent an idea of how to price your home. Ask the agents why each particular home was included on their CMA. Have a list of questions and compare the answers you get from each agent. As you will find out, a CMA will show you varying prices for what each agent thinks your home is worth. Look for what seems to be a reasonable price. Some real estate agents will want to price your home below market value, looking for a quick sell or a bidding war. Some will overprice it looking to play on your hopes that your home is worth more than it really is, but an overpriced home will sit on the market longer and will likely need to be reduced later. Most real estate agents will provide you with a home value estimate or Comparative Marketing Analysis (CMA). It as good idea to find real estate agents who have plenty of experience pricing homes in the area, especially as the market turns to a buyer's market.

3. Consider a Professional Appraisal A CMA will give you a good idea of the value of your home, especially if the agent is familiar with pricing homes in your neighborhood. However, for several hundred dollars that it usually costs to purchase a professional appraisal, the money could be well spent for several reasons. If the CMAs you get from real estate agents are not reasonably consistent, you might want to get an totally unbiased view point, one that you pay for. An appraisal of your home will make clear anything that may be wrong with your home and it adds an additional layer of assurance for prospective buyers. Appraisers rely on in-person inspections of your home, recent sales of like-homes in your area, and other data to arrive at their opinion of your homes’ value. The report you receive from an appraiser is more detailed than a common CMA. The appraiser's report is a full-blown description of your home and the criteria used to formulate the valuation.

4. Research On Your Own You can research several ways. Stop by homes that are for sale in your area and pick up a flyer. Spend an hour or so on the Internet looking at homes in your zip code with the same square footage, bedrooms, and bathrooms. Finally, visit open houses around your home and make an impartial assessment of how those homes compare to your own in terms of condition, location, size, ages, and upgrades. As you visit the open houses, make an honest assessment. Given similar condition, age and square footage, would you buy your home or the home you are touring?

5. Price per Square Foot Some agents may want to price your home solely on price per square footage. While this is an industry standard way of calculating home prices, there are many other tangible aspects that go into your home’s price. The average price per square foot in your neighborhood should be the starting point for setting your home’s price.

6. Market Conditions Consider the overall housing market in your area. Are home prices moving up over time? How long do homes stay on the market before they are sold or withdrawn? Where are interest rates? Is the overall economy in your area and state strong or weak? Are employers hiring or are they overly cautious of bring on new employees? Are builders actively building new homes? Will you be entering a buyer’s market or a seller’s market.

7. Determine Your Selling Costs
There are many costs involved in selling your home. Don’t shy away from getting to the bottom line as this is essential information. Use a variety of mortgage calculators and financial calculators.

8. Flexibility and Options Both you and your buyer may have needs that go beyond the bottom-line. If you are willing to close escrow quickly, you will attract buyers who want to move in right away. A lease-option can help first-timers who need down payment assistance. If you can offer seller-financing, your home will appeal to buyers who need to stretch their financial resources. The more creative and flexible you can be in meeting the buyer's needs, the more success you will have in pricing your home to sell. If your home has been on the market for a while, can you offer a point or two back to the buyer to help with closing costs or needed repairs.

9. Use a Discount Real Estate Broker There are many good reasons to use a good discount real estate broker. The obviously reason is that you keep more of your home's equity, but in a buyer's market, using a discount real estate broker gives you pricing flexibility and that gives you not only a cushion to negotiate but a distinct competitive advantage over the other homes on the market using full-commissioned brokers.

About the Author:

Jeff is the owner and partner of We List homes 4 Less, a full-service real estate broker in the Santa Clarita Valley. Jeff is a strong advocate of using the Internet to promote niche local business and pass the savings onto clients. Their site rates in the top 99.75% of all Websites according to Alexa, a traffic rating service owned by Amazon. Find more house selling advice and mortgage calculators at We List Homes 4 Less.

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