Effective Home Pricing Strategies

By Monica Schaefer

Homeowners who are trying to sell their home in this historically slow market know firsthand just how hard it is to attract buyers. While location and size are important factors for buyers, the sales prices is likely the number one way that sellers attract buyers.

What is the key to setting the sales price for your home?

Determining an asking price for your home is more of an art than an exact science, but one of the key components to finding a competitive sales price is to obtain and examine a list of comparable sales (commonly referred to as “comps”) for homes that have recently sold in your neighborhood.

While you can consult online home value sites, such as Zillow, Trulia, and Homes.com, be cautious about using these “estimated” home value sites, as they can have a steep margin of error. Your best bet is to request comps from a local real estate agent or broker who will have access to all the recent sales in your area. A knowledgeable agent will be familiar with recent sales as well as other homes currently on the market and how they compare to your home.

The most valuable comps will come from homes that have sold within the last 90 days, are located in your neighborhood, are similar to your home in model, style, number of bedrooms and bathrooms, and square footage.

Determining the square footage of your home is a vital component when crafting a reasonable asking price, as it will help determine the market value. While there are no laws governing how square footage is measured, there are guidelines established by the American National Standards Institute, FHA/VA, and the Real Estate Commission. However, the method of how the home is measured or what is or is not included can vary, so it is important to have an understanding of the guidelines for your particular area. For portions of your home to be included in the overall square footage, they must meet these guidelines:

• Must be a finished space, intended for human occupancy.
• Must be heated through a permanently integrated heating system.
• Must be inhabitable year-round.
• Must have a ceiling height of 7 feet or 6 feet 4 inches with beams or other items that may hang down.
• Must be directly accessible from another finished space.
• Must be above ground.

Use the guidelines to carefully evaluate whether the basement you finished can be included if a portion is underground or if the bonus room above the garage is exempt because it can only be accessed through an unfinished space. If you have not made any additions or improvements to the home, the easiest way to determine your square footage is to review the documentation you received when you bought your home. Otherwise, consult a local home appraiser to determine the best way to accurately calculate your square footage.

Home values are often based on the price per square foot, which is why it is crucial to have an accurate number for your home. When reviewing local comps, divide the price by the square footage to determine the price per square foot. Use comps for homes that are within 10% of your same square footage, as homes with larger square footage usually command a lower price per square foot, and small homes command a higher price per square foot.

While comparable sales and value based upon square footage will provide you with a solid base price for your home, they will not allow you to compare the upgrades and condition of these homes to your own.

If you are able to locate online photos or a flyer of the homes that are currently for sale or have recently sold, this will allow you to view the upgrades and overall condition of the home. Upgraded kitchens and bathrooms can certainly add value to your home, but how much value is a delicate question.

In all likelihood, you are emotionally vested in your home, particularly if you have invested money or sweat equity into your home. This can alter your ability to set a realistic value for these upgrades. While you may love your black Italian marble countertop, this particular color or style may not appeal to many buyers. Therefore, the fact that you spent thousands of dollars on this upgrade may not translate into a direct increase in your home value.

Try to remove emotion from the process of determining your asking price and seek the opinion and perspective of friends, family, and most importantly, a local real estate expert. Watch any episode of HGTV’s Design to Sell, and you will witness firsthand how emotional and defensive homeowners can get when real estate agents or prospective buyers evaluate the interior of a home.

The reality is that you want to sell your home for the best price possible, so take a deep breath and approach this process as a business transaction. Open yourself up to the opinions of others that can offer honest comments about your home and what it will take to appeal to a broad range of potential buyers.

This thorough exercise will lead you to making an informed and realistic decision when you set the asking price of your home. A well-priced home will draw attention from potential buyers and result in a quick sale, even in a slow sales market.