How To Price Your Home
Comparables may play the biggest role in setting the price of your home or property. Considered part art, part science, "comps" are regarded as the single-best tool in determining a home's value. There are some tricks of determining which comps are the best, including the location of your property and the price per square foot.
Look at Unsold Homes
Homes on the market that haven't sold yet are also a consideration, although not a strong one, since it's unproven whether the house will bring the money it's asking. But, look at the active competition. Find a home most similar to yours and find out how many days it has been on the market. If the house has been sitting for a while (more than 60 days), you will see the market is not convinced that home is correctly priced. Once you see a "Sold" sign, find out how much above or below the list price it sold for. This will give you a good idea of how the market is behaving and how aggressive you can be in setting a price.
Use Square Foot Pricing
Some neighborhoods are a mixed bag of architecture, style, and size, which means if you can't find another home similar to yours, you can use square foot pricing. How? Take 3-5 homes as similar to yours as possible, add up the square footage, and divide by the number of homes. This will give you an average square footage for your comps. Then, add up the sold price of each home, divide by the number of homes sold to get the average selling price. Lastly, divide the average sold price by the average square footage to get the average price per square foot. Once you have the average price per square foot, multiply it by your home's square footage. This is just another tool to help you price your home.
Step 1: Find the average square foot of comps
Home 1 -- 1,950 square feet
Home 2 -- 2,400 square feet
Home 3 -- 1,800 square feet
Home 4 -- 2,050 square feet
Total -- 8,200 square feet
8,200 / 4 = 2,050 sq. ft.
2,050 is the average sq. ft. of your comps
Step 2: Find the average price of comps
Home 1 -- $310,000
Home 2 -- $410,000
Home 3 -- $299,000
Home 4 -- $325,000
Total -- $1,344,000
$1,344,000 / 4 = $336,000
$336,000 is the average price of your comps
Step 3: Divide the average price by the average sq. ft.:
$336,000 / 2,050 = $164/per sq. ft.
$164 is the average price per sq. ft. of your comps
Step 4: Set the price of your home:
Take $164 and multiply it by your square footage to get a price. For example, if you have a 1,975-square-foot home, multiply it by $164 (e.g., 1,975 sq. ft. x $164 = $323,900).
Bingo! Your home's price: $323,900! You should list your home near to this price.
A few other points: a two bedroom home of the same size as a three bedroom home will generally sell for less than the three bedroom home. In the same area where homes are at roughly the same standard, the price per square foot will increase slightly as the size decreases.
Get a Comparative Market Analysis (CMA)
If you've used the three strategies above, but still need reassurance, go to a real estate agent -- or, two or three -- and ask them for a CMA. Whether you use the agent to sell your house or not, they will be more than willing to provide a CMA in hopes of getting your listing. It shouldn't cost you any money to get one. If by now you feel that the task of pricing your home is a bit daunting and you have not yet begun to market it, you may decide to retain a realtor. In many cases, that is going to be your best option.
Get an Appraisal
If you really need extra assurance, hire a professional appraiser. An appraiser will cost approximately (CI) $350-$600, depending on your home size and uniqueness of the property. They will come to your home and itemize the number of rooms and amenities (e.g., swimming pool, canal lot, etc.) and will pull comps from other nearby homes that sold recently. Once they have completed their review of your home, the comps, and the market, they will furnish you with an appraisal. This will be an estimation of your property's fair market value. An appraiser is also qualified to and will likely provide you with an estimate of the home's replacement cost.