How to Determine the Price of Your Home

It’s a familiar refrain from sellers, “The house down the street sold for (fill in the blank), followed by “ so my house should sell for (add  $10,000)”.   Unfortunately, sellers are not the only ones who make that mistake.  Realtors, appraisers and buyers– all of us fall victim to the past. We  look to the past to establish value when  we should be looking  at today, i.e. how does the home compare to others  that are currently on the market. Buyers  can’t do comparative shopping in the past tense and, as a result, buyers  and sellers frequently end up quibbling over a few thousand dollars because they have past value stuck in their heads.  The home should  be actively on the market and easily available for showing in order for it to be a true comparison.

A few weeks ago, I was hosting a new construction open house when a lady came to visit. This smart lady was planning on putting her house on the market  and was touring competing properties. She had a 23 year old property and was trying to decide what she should do to make her home competitive with new construction.  She had oak cabinets, laminate cabinet countertops and no hardwood flooring. This was exactly the right approach. She was trying to see her home through the eyes of a potential buyer.  I’m not sure what she decided to do but she was definitely on the right track.

Sellers, realtors and appraiser should follow that smart lady’s approach and put more emphasis on what’s the competition when establishing value.   Real estate appraisers are required to use comparable properties that are sold, pending and, in a few cases, can sneak in an active listing or two.  Unfortunately, they must give the most wait to the sold or pending properties.  However, the competing active properties are the ones that should be given the most weight because that’s what the buyer is seeing, not previously sold homes.

There are, of course, even amongst active listings, comparisons that have to be made.  Sellers need to get out and look at the competition the same way a buyer shops for a home. An easy way to do this is to visit your neighborhood open houses because you’ll find homes that are similar in age, style and location.   Within a community, homes on cul-de-sac lots are worth a little more; corner lots a little less, unless they are larger than other lots on the street.  A backyard with southern exposure is a plus; so is attractive and well-maintained landscaping.  A driveway with a grade of no more than 2-3% may sell faster than one with a steep slope unless, of course, the steep driveway facilitates a panoramic view.   Many times these items add up to a faster marketing time but not necessarily a significantly higher price. Getting rid of the clutter and unwelcome pet odors, or in other words,  good housekeeping can add or subtract thousands of dollars in value.  If you have a two car garage make sure you’re using both bays for cars and not one for storage.

Finally, when doing comparison shopping not all square footage should be treated equally.  How square footage is used is more important than its actual measurement.  For example, hallways count as living square footage but no one lives in them.  So do stairwells.  Depending upon the appraiser, some count landings, others only the stairwell on the first floor. The height of the ceiling doesn’t add to square footage but it sure adds to livability and framers and sheet rockers charge builders extra for tall ceilings. Unfortunately, Multiple Listing Service has added  the average square footage price to their listing forms, encouraging everyone in the industry and public to use average square footage costs as a shopping comparison. Buyers, in particular, need to look beyond average price per square foot because it is not a true indicator of value or livability.

A seller who has priced his home based upon sales that are more than a couple of months old and not on what is its  competition today, runs the risk of missing a selling opportunity.  Too often I see offers fall apart between buyers and sellers over a few thousand dollars.  I understand buyers want to get the best price possible and so do sellers.  However, before everyone walks away disappointed from a failed offer, I encourage sellers to take a realistic look at the market through the eyes of the buyer.  After all, they’re the ones who have viewed between ten and twenty homes.  And buyers, when you finally do make that offer on the home you’re planning on living in forever, you should know in your heart and wallet what the fair market value is and don’t low ball just because you think it’s the smart thing to do.   Because that home won’t be on the market tomorrow; it will have become part of the past.