There are more than 5 key factors that influence the sale of your home and the order is not as important as considering all of them when you are selling and pricing a home.
You have all heard the most important factor in selling a home is location, location, location, but there are four others to consider.
- Market Conditions
- Home Condition
- The Realtor
You can make all the necessary repairs to your home, clean it, stage it, maybe even remodel it. But there are some factors that may impact the eventual sales price of your home that are out of your control. So, regardless of how impeccably you’ve maintained the home and despite its ideal location, one or more of these circumstance may rear its head and dash those dreams of riches at the closing table.
Let’s take a look at three of the factors that may impact your home’s value.
The location of a home cannot be changed. The better the location such as a quiet cul-de-sac, backing on to a greenbelt, or a view are more generally considered more desirable. Alternatively, a busy street, nearby power lines, proximity to a commercial or retail business or even too close to a school are often considered less desirable. It is important that you recognize the location and price and market your home accordingly.
2. The condition of the current market
You’ve no doubt heard real estate markets referred to as buyers’ sellers’ or balanced markets. A buyers’ market occurs when there are lots of homes for sale and few buyers competing for them. Since the buyer is in the driver’s seat, prices tend to stagnate or fall in this type of market. When the inventory of available homes is tight and there are many buyers seeking homes, we are in a sellers’ market and home prices rise.
So, what creates these micro-markets? Many factors affect both national and local housing markets, chief among them is the strength of the economy. When times are good, consumers have money to buy homes and home prices typically increase. In tough times, when unemployment is high and incomes stagnant, the real estate market will feel the pinch.
Then, there are interest rates. When they rise, many are priced out of the housing market and when they fall, folks clamor to buy homes. Therefore, the overall strength of the economy may help dictate the eventual sale price of your home.
Pricing your home correctly is critical to the sale. The homeowner wants to sell their house for as much money as possible, but if your asking price is too high your house will only help sell other houses in your area. There are at least three negative outcomes you can expect from overpricing a property:
a. The time your home sits on the market will increase, making buyers think you are more likely to accept a lower offer than the home’s fair market value.
b. You will be missing out on buyers who should be looking at your house, but because it is out their price range they will miss it. This often happens when you price outside of a range such as choosing $ 810,000 instead of $ 799,900.
c. You receive low offers or no offers at all. A higher asking price does not always equal a higher sales price.
The more you overprice a property, the more likely you are to eventually sell it at a price lower than it is
While pricing a home for the market isn’t rocket science, it’s also not something that the inexperienced can do and meet with success. It takes years to learn how to properly research a real estate market, to learn how to find truly comparable homes and all of the various other factors that go into determining a home’s current market value. If your listing agent comes up with the wrong price, your bottom line is impacted.
So how should you price a home? Price your house to attract appropriate buyers for your neighborhood and location. The more buyers that come to see your home, the more they will compete for your house, which will drive your sales price up. Competition will result in receiving offers over and above your asking price. Don’t let Realtor buy your listing by agreeing to sell it for more than it’s worth as it will only be a matter of time before they are back suggesting a price reduction.
4. Neighborhood changes
Your neighborhood, and the surrounding area, may look nothing like it did when you bought the home. Even the most careful research performed before committing to buy a home can’t foresee future zoning changes, the neighbor that builds an extra story on his home and blocks your view, or the sex offender that relocates to your neighborhood. All of these events can negatively impact your home’s value and, subsequently, how much you’ll receive when you sell it.
Suppose a change in zoning allowed a dump or landfill to be placed near your neighborhood. Nearby home values will drop by as much as 7.3 percent according to Business Insider’s Mandi Woodruff.
A power plant will ding your value from 4 to 7 percent, a sex offender as a neighbor will drag down your home’s value by up to 12 percent and, woe to you if a neighbor forecloses because, according to Woodruff, the national average loss of value of nearby homes is $7,200.
Now, some neighborhood changes should be applauded, at least by nearby homeowners. There’s even a name for the phenomenon: The Walmart Effect. The name typically describes the economic impact on local businesses when a big-box store, such as Walmart, moves into the area, but it’s been found to apply to home values as well.
So, if a Walmart comes to your neighborhood, rejoice – you may just get a 3 percent increase in home value, according to a study by the University of Chicago and Brigham Young University.
And cheer loudly when you learn that a Starbucks is coming to town and hope that it’s within walking distance of your home. Homes within walking distance of a Starbucks, however, saw a hefty 96 percent increase. Add Trader Joe’s and Whole Foods to the list of please-come-to-my-neighborhood” businesses. If they do, your home may see a 17.5 percent increase in value.
5. Your real estate agent
- Their experience at marketing houses in your price range and in your area.
- Their presence on the internet through a web site and/or blog.
- Their demonstrated knowledge of home prices in your area.
- Their marketing plan for your home.
- Their track record.
After pricing a home, the number one job of a listing agent is to market the home to find the buyer that will pay the most amount of money the market will bear. Marketing not only requires know-how, but money as well. How well-positioned financially is your agent? Ensure that the agent you hire has a robust marketing budget and isn’t afraid to spend what it takes to get your home sold. You’ll pay the same amount of money for the services of an agent who gives you bare bones service as you will for the professional – so choose wisely.
The reason I researched and wrote this post is because it forms the basis for of how I help Realtors in their marketing. We try to cover off all of these areas in their listing presentation and use the analysis to formulate a marketing plan for a home. This information is designed to help both Realtors and Sellers and gives Buyers insight into what is happening on the other side. If you have anything to add or a comment I would like to hear from you.
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