When deciding to list and to price your home, a home seller must remember that their home is competing in the real estate market with other similar homes.
Yes, sellers, you are competing for a real estate buyer’s attention. As the red hot seller’s market of 2021/2022 is cooling down, it is important that home sellers realize their home is competing with similar homes in the marketplace.
Just because a buyer didn’t put an offer on your home, doesn’t mean they are out of the market. They didn’t find your home to compete with other homes in the marketplace. Often within a month or two of seeing your home they go on to purchase a home.
Today’s real estate buyers have choices and your home will be competing to other homes in a similar price range.
The graphic below, shows the order of importance of some factors that go into how to price your home and determine fair market value. The order of importance can vary from home to home and in each situation, but in general, you will find the order of importance to be fairly accurate.
Location of Your Home
It should go without saying that you can not compare homes in one town to homes in another town. You want to stay within your community.
Different areas of a community will be viewed as better than other areas by home buyers. The better the area or neighborhood the more a potential a real estate buyer will be willing to pay for the home.
Lastly, I would like to point out that a home on a busy street will not sell for as much as a home in a deep neighborhood on a cul-de-sac.
Location is one of the single most important factors in pricing your home. When the banks appraise your home they want competing or comparable properties that have sold as close to your location as possible, usually no more than a mile.
Condition Of Your Home
Homes that are taken care of and in impeccable condition will command a higher price.
If your home is cluttered, not so clean and has some repairs to be done you cannot compete with the homes in the marketplace that is in spectacular condition.
Homebuyers will have certain expectations of the condition of a home. Sellers that want to compete go through their homes with a fine tooth comb and make sure their home will stand up to the very best competition in the marketplace.
Size Of Your Home Compared to The Competition
Price per square foot is looked at when pricing your home.
When comparing to competing homes you want homes to be no more than 25% smaller or larger than your home. It would be a stretch to compare a 2500-square-foot home to a 1400-square-foot home even though they may be located in the same neighborhood.
The range of price per square foot for similar homes can really help you put the pricing of your home in perspective. Say you look at 10 homes with similar square footage and they range from $95 sqft to $231 a square foot and your trying to ask for $300 a square foot, you probably need to rethink your pricing strategy
When thinking about square footage it is only above-ground space you consider. Basement space is severely discounted as well as sometimes 3rd-floor finished attic space.
Function Of Your Home
The function of your home may greatly impact the price that your home will most likely sell for in your local real estate marketplace.
Major things to consider are the number of bedrooms, the number of baths, a master bath and so on…..
Being in New England homes can be a wide range in age. A colonial in 1950 will function very differently than a colonial built in the 1990’s. Rooms are closed up and not as open and home buyers want a much more open feel today. Though there is lots to consider when it comes to function here is a specific scenario.
A homeowner has 2800 sq feet of living area, about a third of it is a family room on the third floor that is accessed through the fourth bedroom. You comparing your home to similar sized homes but they all have first floor family rooms with most of them having cathedral ceilings.
At the end of the day, the first home will not compete from a function standpoint. Who would prefer a third-floor family room? Nobody!!
Appeal Of Your Home Amongst the Competition
How your home is perceived by the general buying public will greatly impact the price home buyers are willing to pay. I’ve been in some odd homes.
The square footage is there, the function is there, the location is there but your home may have something that makes the house unappealing. It could be the design, it could be the style, it could be a bizarre layout or any number of things.
A perfect example is you can have everything to make your house stand out amongst the competition but you have high-tension wires running through your backyard. This makes it a hard sell.
The acreage or lot size of your home has some value but not as much as homeowners think. Yes, an acre lot is more valuable than a 6,000 sq foot lot. But a 10,000 sqft lot really has no impact on value over a 7,000 sq foot lot.
Basically when you are talking about acreage a building lot is a building lot. If only one house can go on it there are generally no significant value adjustments.
Also, be realistic about the usable space of your lot. You can have a perfectly flat 7500 sq foot lot that can have more useable space than 10 acres of wetlands. The 7500 sq ft lot would probably be more desirable unless a home buyer was hell-bent on privacy.
Personal Improvements Of Your Home
Improvements to your home that are highly personal and to your taste have little to no impact on the value. You may laugh but I have run into each and every one of these examples.
- I have an archery range that I put in that cost over $8,000
- Hot tub sunken smack dab in the middle of a 20×20 foot family room
- Soundproofing the entire basement
- 5 Coy ponds all over the yard
- Combo wood burning/ oil furnace
- Working toilet in the corner of a dirt and fieldstone basement with no sink or shower
- 3 sheds on one small lot
- 7500 square foot bomb shelter from the 1950’s that cost over $1,000,000 to build in the 50’s
Every one of these sellers tried to put a significant value on their highly personalized choices. When in fact, some of these choices affected value negatively.
The Competition Starts With The Price
Your home will compete with similar homes on the market based on many factors. The price you set for your home will pre-determine how it will compete. How you price your home, compared to the competing homes in the market, will determine if you are a market leader or a dud that can’t get out of the gate.
A home overpriced at $500,000 may put your home out of the competition entirely. But, price that same home at $445,00 and your home stands out as a leader amongst the competition. No amount of marketing or showings will produce results with a severely overpriced home.
Pricing Your Home To Compete
Pricing your home to compete, starts with a Comparative Market Analysis. Your local real estate agent will prepare a CMA that starts with competing homes that are on the market, under agreement and sold within the past 3-6 months.
A CMA shows what homes are actively on the market that are possible competition for your home. More importantly, it shows what homes that are comparable to yours sold for in the recent past.
When pricing your home consider these factors. Be realistic in comparing your homes to the comparable homes on your list. Consult with a Realtor you trust. Having good market data as well as knowledge of what today’s home buyers want is key to a successful transaction. Happy Home Selling!!
Other Real Estate Resources:
- Is a home inspection necessary when buying a home? Paul Sian spells out why a home inspection is vital to protecting your investment.
- Who doesn’t love shiny new appliances? When buying a home who wants to take on another family’s dirt and grime? Eric Jeanette discusses several creative ways to get new appliances when closing on a home.
- As the market slows down across the country we are still seeing a pretty strong market in Massachusetts. Bill Gassett offers sage advice on avoiding mistakes when in a bidding war.
- Wondering where the Home Depot near me is? Get the HOme Depot app to help with all your home improvement projects.
How Will Your Home Compete In The Real Estate Market? is provided by Kevin Vitali of EXIT Realty. If you would like to sell or buy a home, give me a call at 978-360-0422 and let’s get the process started.
Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, Northshore and Metrowest. Including the following communities and the surrounding areas- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford