If you’re looking at selling your home, it’s a really good time to do so. Home values are still quite high.
Home value is definitely a key consideration. If you price your home too high, buyers who are looking at a lot of homes won’t bite. If you price too low, you’re leaving money on the table. But if you price it just right, buyers will see the value and you could actually start a bidding war for your home.
How do you get in that perfect pricing zone? We’ll share a couple of strategies you can use to make sure your price is something the market will accept. You may even find that your price may create a little competition. Finally, we’ll go over what the professionals look at during an appraisal to determine value.
Figuring Out Your Home Value
There are three steps to getting a very accurate estimate of home value in order to attract multiple buyers and avoid surprises during the sale process.
The easiest way to establish a baseline for your home value is to take advantage of the massive amount of data available online. Home sites like Rocket Homes Real Estate LLC will help you get a baseline idea of the value of similar homes in your area.1
We’ll get a little more into comparables below, but looking at homes that are substantially similar to yours will help you get a more accurate picture of realistic sale prices.
Online sites aren’t the only thing you should look at for your home pricing strategy, but they do help give you a baseline. There are many more ways to improve your home pricing strategy and get into more specifics.
Know Your Market
One way to refine your home pricing methodology is to really look at comparables in your local market. So, what’s a comparable?
When pricing your home, you want to measure it against houses that are similar in your area. If you have a three-bedroom ranch with a recently renovated master bath, you should be looking at similar houses when you price. You definitely shouldn’t compare a bungalow to a colonial.
If you have the opportunity to go through any of these houses during an open house, it’s to your advantage to do so. Not only will you be able to see the types of materials being used, but you can really get a peek at how the home is staged. You can copy anything you like and apply the same methods to your house with a similar layout.
Call In The Pros
According to the 2018 Profile of Home Buyers and Sellers from the National Association of REALTORS®, the average homeowner stays in their home for about 9 years. You just don’t go out and sell your house every day. It’s one of the things that makes it difficult to try to pin down a market value.
This is where bringing in a real estate pro can really help. Real estate agents like our friends at Rocket HomesSM show houses and find them for buyers for a living. They see a ton of properties and deal with this market every day. They know what the market will accept in terms of prices.
Understanding The Appraisal Process
If you’re lucky enough to have someone pay cash for your home, congratulations! You’re home free once you find a buyer. However, most buyers don’t have those kind of savings on hand and will be using a mortgage. This is another reason it’s important to price your home right. Let’s go over how that works.
“The Price Is Right” is a useful analogy here. Anyone who watches that show knows you have to be closest to the actual retail price – without going over – when bidding on the show’s featured products.
Home appraisals are quite a bit like that. Mortgage investors like Fannie Mae, Freddie Mac, the FHA and VA don’t allow lenders to write a loan for more than the home is worth. There are a couple of reasons for this.
First, the property is collateral for the loan. If something unfortunate were to happen and your buyer had to foreclose, the lender or investor in the property then sells the house to get as much of their investment back as possible. They don’t want to approve a mortgage for $250,000 when they can only get back $200,000. It also protects the buyer from overpaying for a property.
In other words, if your asking price is $200,000 and the appraisal comes in at $190,000, your buyer would have to bring an additional $10,000 along with their down payment in order to close the loan.
It’s a competitive market so it’s possible that the buyer is willing to bring an additional amount to closing. That being said, if you’re realistic with your pricing, it’ll attract the most buyers because they’ll have more financing options available. That’s when you get a bidding war between people who are willing to bring a little bit extra.
As you did earlier, the appraiser’s job is to go out and find comparables within a certain radius of your house. If you looked at truly comparable sales, the appraiser’s findings shouldn’t be much of a surprise when they come in. Doing your homework will make things go a little smoother.
The appraiser ultimately evaluates your house in comparison with other similar houses in the area. When they’re done, they come back with their professional valuation of your home.
While there’s no substitute for an actual appraisal, hopefully following some of our tips helps you price your home in a manner that’s both realistic and creates competition. The appraisal process is definitely a key part of getting any home loan. In addition to evaluating the price, the appraiser must also make sure the property is safe.
1Quicken Loans®and Rocket Homes Real Estate LLC are separate operating subsidiaries of Rock Holdings Inc. Each company is a separate legal entity operated and managed through its own management and governance structure as required by its state of incorporation, and applicable legal and regulatory requirements.