The other day, one of my agents received a call from a local resident asking what their home was worth. The agent responded, “I would be more than happy to let you know, but first I must see the home.” The caller was none too happy to have someone come over, and argued why they just couldn’t give them a price over the phone.
Everyone knows the saying, “location, location, location”, but in this day and age, it’s also so much more. We must also know what type of condition the home is in, inside and out. As easy as it might be to just give someone a price over the phone, it just wouldn’t be accurate.
So how do Realtors price a home?
Well, we research where the home is located. Is it on a double yellow-lined road? Does it back up to a highway? Or perhaps, is there a shared driveway?
And, what about the neighborhood? Believe it or not, the house next door is a big key in the value of your home. If the homes down the street are all much smaller, and your next door neighbor’s home looks like its seen better days, unfortunately that lowers the value of your home. Location really does play a large role in pricing, but other factors are just as important.
Market trends are also key in pricing. Are the prices of homes going up in your neighborhood, or are they going down? What are the buyers like who are purchasing homes? Are they first-time home buyers, or are they mainly families who are looking to upgrade? If your home is located in an area where starter homes are more common, then the price of your home may not be as high as you might think.
We also look at how updated the home is. If there are no updates, it does not lessen the salability of the home, but it often reduces the asking price. A kitchen with granite counters and stainless appliances is often worth more to buyers than a kitchen with Formica counters and dated appliances- that much is obvious. But, there are exceptions.
How is the layout of the home? If there is a great flow where rooms are open and feel spacious, that is worth more than a small, closed off kitchen that is considered “gourmet.”
The premium lies in the “good bones” and “potential” where buyers need only tweak some spaces by replacing the carpet with hardwood flooring, or making small updates in the kitchen. I recently visited a home where it looked like nothing had been updated since it was built in the 50’s. However, the rooms were so spacious, open and bright, that the kitchen could easily be updated by just replacing the flooring and appliances. This home ended up receiving numerous offers. Just down the block, another home was also on the market. This home was already updated. But, while it was just $75K more, the rooms were much more closed off and the flow was choppy. The kitchen is extremely small, but buyers could always extend it.
The market trend just a few years ago led buyers to want move-in ready homes. They were extremely reluctant to take on homes that needed any amount of work. We termed the phrase, “Buyers are willing to overpay for a move-in ready home, rather than under-pay for a home that needs work.” However, that trend today is slowly starting to change again. Buyers are more willing to do some work, but many draw the line at taking on a home that needs a great amount of renovation, such as adding on an extension.
What are homes like yours selling for? We look at those too. Comparables are found by analyzing homes in your neighborhood that have similar square footage, upgrades, and amenities. If a comparable home sold for $800,000, there's little chance you'll find a buyer willing to pay $1M for your home. You always want to be the least expensive home in the neighborhood when it comes to selling. Everybody loves a deal.
Lastly, how motivated are the sellers to sell? Some homeowners just want to test the market, and if they get what they want, then they are willing to sell. These types of sellers are willing to wait for that “perfect” buyer, you know, the one willing to overpay for their home. However, other sellers must sell as quickly as possible, either because they have moved and are unwilling to carry two properties, or are relocating out of town. These sellers need to price aggressively to attract buyers immediately.
Buyers are savvy. Technology today allows them to search the local MLS, research the latest trends, and even see how a neighborhood's prices have changed over the last 30 days. They can even take a picture of a house with their smartphone and get all the information on it, thanks to a new app. They will know if a home is overpriced.