You’ve loved your home but are ready to move on. How much should you list it for? Although a casual observer might believe a listing price is an arbitrary number, many factors are taken into consideration when pricing, including market conditions, historical data, location and amenities. Overprice a property and it could linger, unsold, for months. Undervalue it, and you’re leaving money on the table. While getting a home appraisal can give you an idea of your property’s worth, pricing a home is part science and part art, so we asked a REALTOR® to break down that process.
“When I’m asked to price a property, there are many aspects involved and lots of fine-tuning,” says David Stevens, a REALTOR® with Royal LePage Coast Capital Realty in Victoria, British Columbia. Some considerations include:
Current local market conditions
Pricing a home should include looking at the current market conditions and trends in your area. Knowing how many properties with similar features are up for sale and how fast they’re being snapped up can help determine how a property should be priced.
“This takes into account the ability of active buyers and their buying power or capability,” adds Stevens. “Comparable current and sold listings are an invaluable source of information to look at when pricing, because sold property prices can always be relayed to any buyer or seller by their REALTOR®.”
When there’s low inventory in a neighbourhood, this can create a seller’s market with more competitive listing prices, while a bunch of homes for sale may require lower asking prices and indicate it’s more of a buyer’s market.
“Sought after neighbourhoods near well-respected schools will typically demand a higher price tag,” explains Stevens.
Remember: even homes on the same street can differ in price—if one side of the street backs onto a body of water, for example, those homes could be priced higher.
Size and layout
A home’s layout can also factor into its pricing; most families in his market look for three or more bedrooms on one level, notes Stevens.
“The square footage of a home and land size also influences the value of a property,” he says. “Depending on the area and the buyer trend in an area, aspects like privacy or usable land play a role.”
Age and condition of the house
How old a property is, and whether it has or needs major updates, including windows, roof, kitchen, bathrooms, and mechanical systems all factor into pricing.
“When the major components of a home have been updated or replaced, many buyers see that as a long-term investment they will not need to spend money on,” explains Stevens.
DIY projects gone wrong can be detrimental in obtaining top dollar because substandard work will decrease your home’s appeal and, therefore, the price, he adds.
A home with an in-law suite or additional income potential can be important as it gives the buyer flexibility with their financing and buying capability, he adds.
“Within urban communities, it may be hard for a buyer who wants a detached workshop or a studio. This is considered special and not easy to find, so it must be taken into consideration when pricing.”
REALTORS® also take a seller’s motivation into account when pricing a property. For example, if a seller has an accepted offer on another property, or they’re being transferred out of town, they may ask for a compelling listing price to attract more buyers, says Stevens.
What is the MLS® Home Price Index and how does it work?
REALTORS® have a powerful tool at their disposal—the MLS® Home Price Index (MLS® HPI). It provides a more precise picture of home price trends by gauging prices for the market as a whole, and prices for specific housing categories. This information allows them to do a comparable market analysis, where they learn what other similar homes have recently sold for, which gives them solid indicators on how to price your property.
Because this data can change from month to month, it’s important to use an accurate tool that tracks prices to get the latest information.
“Ultimately, the pricing of a home is the seller’s decision with the help of their REALTOR®,” says Stevens. “The goal is to price the property to attract serious buyers and to prevent an extended period of time on the market that may ultimately come at a cost.”
Working with a REALTOR® to price your home gives you peace of mind that you’re setting yourself up for success with the advice and expertise of a professional.