Have you ever wondered if your home is priced accurately?

Not every seller realizes how to price a home correctly. Picking the right sales price requires expertise, and it's also an art in many ways. It’s a fact that one of the biggest reasons a home doesn’t sell is that it’s not priced right. By this, I mean that it is priced too high. If it is priced low, or below the market, it will sell quickly so that is not really the problem. If your home is priced accurately, it should sell rather quickly, especially in today’s market. 

Of course, you do not want to pay too much! But at the same time, putting in a competitive bid is critical in having your offer accepted. It’s a balancing act, to be sure. Getting a good deal on a house depends upon understanding the market, the house’s value, and whether it is priced accordingly. 

Analyzing comparable. Looking at market conditions. Evaluating property conditions. Nailing down financial considerations. There is a lot to think about when buying a home. Good thing we’re here for you. Let’s find out how to know if a house is priced right.

The biggest reason a home is priced high is that the owner is letting their emotions get involved. Sometimes you can get the price right even if you’re emotionally involved in the sale, other times you can’t. You can’t afford to let your emotions affect your objectivity when pricing your home so you should do your best to get it right the first time.

How do you know if a house is priced right? It requires a little bit of homework. But don’t worry – it’s manageable. Here’s what you want to do:

1. Check Comparable

This is one of those things that sounds impressive: “I’m going to check the comparable. I’m a savvy buyer; that’s what we do.” It’s also one of those things that are easy to do – if you know where to look. So, savvy buyer here’s where you look:

• MLS. You can’t access the MLS unless you are a licensed real estate agent, so make sure you have a great one on board. They can get the information you need to determine the value and figure out a bid.

• Public Records. The county in which you are searching for a home keeps records of sales. You will likely be able to search these online; if not, go to the county courthouse. Using public records like property transfers, deeds of ownership, and tax assessments along with some mathematical modeling, these tools try to predict your home’s value based on recent sales and listing prices in the area.

• (Be sure to call and ask if you need an appointment.)

• Online Resources. (Check for websites that are known and accessible)  

What will the comps tell you? They tell you the price that homes sold for according to certain criteria, such as:

• Location

• Time frame (e.g., within the last three to six months)

• Size 

• Number of bedrooms and bathrooms

• Condition of the home (e.g., recent renovations, updates, outdated features, etc.)

• Age of home

• Nearby amenities and features 

• Price per square foot

Check the Long-Term Cost of Ownership

Is the price of home too good to be true? Well, you could be getting a great deal. or you could be getting a money pit. When considering the big question – how to know if a house is priced right? – consider ongoing costs. How much are utilities going to cost month to month? Will you need a new roof in a year? Do you foresee needing major upgrades?

Many Things to Consider

• An appraiser will take into consideration many factors you may not consider relevant. If your home needs repairs then this should be addressed. Most buyers will consider any repairs that need to be done and will usually overestimate the cost to repair them so their offer will usually be low. If you address repair items beforehand then this will eliminate low ball offers.

• Once you’ve chosen comparable properties, things get a little tricky. You’ll need to adjust for differences between your house and the comps, such as adding value to the comp price if it has more bedrooms than your house or subtracting value if its interior is outdated, for example. How much you add or subtract depends on conditions in your market, which can vary widely. After adjusting values, look at your highest and lowest comps. A rough estimate of your home value is somewhere in the middle.

• In addition to repairs, an appraiser will consider the overall design and appeal of the house. If your home has functional issues such as an inadequate bedroom or bath count or an awkward floorplan this may affect your asking price. These problems cannot typically be fixed immediately and at a low price so if you are wanting to sell your home as is then this should be factored into your list price.

• Checking into comparable sales prices can be helpful, but take care to compare only the prices of homes that have sold within the last three months. 

• Putting a lot of money into home improvements might not pay off unless the work involved a major upgrade, such as adding a whole new bathroom.

• Look into what other sellers in your area are asking for their homes, but make sure those properties are as similar to yours as possible so you're not comparing apples to oranges.

• Pricing your home too high can be worse than pricing it too low. 

Why home value is important

Knowing your home’s value allows you to evaluate what you can afford, determine whether a listing is priced appropriately, and decide how to price your own home. And the benefits of finding a home’s value don’t end with a purchase or sale: Refinances, home equity lines of credit, insurance premiums, and annual property taxes are all based on home value.

Determining your home’s value means greater control over these processes. Property taxes are almost always open to appeal, for example. If you can prove an assessment is too high by pulling comps, you may be rewarded with a lower tax bill.

Seller's Point of View

From the seller’s point of view, right-pricing starts with a walk-away number: a price that would be so low it would result in financial hardship. Offers at or below that level are not welcome (although good practice dictates a counter, rather than a true walk-away, which risks bringing emotion into what might otherwise have resulted in an acceptable final offer). At the top of the pricing, the range is the outlandish pie-in-the-sky prices that never really materialize. Those billionaires who don’t care about their bottom lines also never materialized. As has been pointed out elsewhere, they didn’t become billionaires by not caring about the bottom line.

Buyer's Point of View

From the buyer’s point of view, right-pricing is what they’re looking for (or at least hoping is out there, somewhere). Many of today’s serious house hunters begin combing the listings by specifying a price range. It may top out at just a bit more than they will be actually willing to pay— but the lower number is often well below what they can afford. Needless to say, if a listing fits all their other criteria but the asking price is below comparable offerings, it’s a lead pipe cinch they will be calling their realtor® to arrange for a showing. It’s a phone call they’ll make sooner rather than later—especially if they’ve had earlier experiences that led to a bidding war.

You can be reasonably assured that your house is priced wrong if it’s been on the market for months with no reasonable offers forthcoming. Other market factors can be at play, but the asking price is the first place to question.

Take Note: 

How do you know if you’re getting a fair value? Even if you’re in a tight market, you can figure out if a home is priced fairly before you make the offer. There are certain ways you can evaluate whether the price of any home is a sound investment or if you’re getting ripped off.

First of all, look at recently sold comparable properties. Comparable properties are similar in size, condition, neighborhood, and amenities. Your real estate agent is your best resource for accurate, up-to-date information on comparable properties, also known as comps.

You should also look at comparable properties that are currently on the market, under contract, or not selling at all. If a comparable property failed to sell because it was overpriced, the property you are interested in is probably overpriced too.

You also have to consider the appreciation rates in the area. Are prices going up? Are prices going down? What do the days on the market look like? If you are in a seller’s market with very low inventory, high demand, and low days on market, you will have a better idea of what a seller is willing to accept. In an appreciating market, you can buy now and reap the benefits of further appreciation down the line.

If you are in a market with high days on market, lots of inventory, and very little demand, then you know that prices are starting to depreciate. In that case, make sure you buy 5% to 10% below the market value so that you don’t lose value as prices continue to drop. In depreciating markets, you need to buy your equity upfront in order to make the best investment.