When you go to sell your home, the most critical aspect is that you have priced it properly. If you want it to sell, and to sell quickly, you will need to choose a listing price that is based on how much your house is worth in your local St. Louis Metropolitan Area.
The Pricing Issue
Overpricing your home is one of the worst mistakes you can make due to the fact that after the first few weeks of being on the market you will lose the initial” freshness” of the home’s appeal. After approximately 21 days it becomes “stale” and interest and demand will drop off. You can always drop your price later on, but this can become a “too-little-too-late” situation.
Pricing it too low doesn’t have the same problem as pricing it too high since houses that are priced below market value will often receive several offers. This will usually drive the price up to the market value. But pricing it too low does run the risk of leaving money on the table that you could have received if the home was priced right in the first place.
Every St. Louis real estate agent will determine a home’s listing price in a different way. Some agents are better at it than others. But most of them will do this for you by preparing a comparative market analysis (CMA) ahead of time. Here are the basic elements of the procedure.
1. Pull Similar Listings and Sales
Your real estate agent will look at every comparable house that’s been listed over the last 3 months that is located in the same St. Louis area as your property. This time frame is important because appraisers will not use comparables that are older than three months.
The list of comparables needs to be restricted to houses within a 1/2 mile radius of your home, unless only a few comps can be found, such as in the case of a home located in a rural area.
Dividing lines and physical barriers, such as major streets, freeways, or railways, need to be considered when determining price. Identical houses that are across the street from each other can vary in value by thousands of dollars in some communities because of perceived desirability.
Homes with similar square footage should be compared, making sure there is only a 10% difference, up or down, in the total, if possible. Similar age is also important when doing comparables.
Desirability should be considered realistically. You might be able to get away with pricing your home higher if you are lucky enough to own what might be considered that “dream home” in the neighborhood.
2. Take a look at the Sold Comps
Your St. Louis real estate agent will compare the original list price of the sold homes to the final sale prices to identify price reductions and will compare the final list price to the sold price to determine the ratio. It is possible in a seller’s market that homes can sell for more than 100% of list price.
They will also adjust pricing for lot size differences, the way the lot is configured, and what amenities or upgrades the property might have.
3. Using Withdrawn and Expired Listings
The next step would be to get the history for the comparable expired and withdrawn listings to see if any of them had been taken off the market and then relisted. If so, those previous “days on market” need to be added back to the listing time periods to get to the correct total number of days on the market.
Your agent will then see if there are any patterns regarding why these homes didn’t sell or if there are any common factors they may share.
Using this information, your St. Louis real estate agent can determine how to keep your house from ending up as an expired listing.
4. Looking at Pending Sales
The final sale prices of these homes won’t be known until the deals close, but your real estate agent can call the listing agents and ask them to tell them how much the home sold for. Some agents will give out that info. Some will not.
Days on the market should be noted. This can predict how long it will take your property to receive an offer. Price reductions of pending sales should also be noted.
5. Compare Active Listings
It’s a good idea to tour other active listings in your area. This will give you an idea of what homes buyers are seeing that are currently on the market and how they compare with your home. Are there any features your home has or lacks in comparison to justify the price those sellers are asking? Keep in mind that sellers can ask whatever price they desire but that doesn’t mean they will actually get that price.
These listings are in competition with your home. It’s a good exercise to ask yourself why a buyer would consider your home over any of the others and price you home accordingly.
6. Comparison by Square Foot Cost
Because the buyer’s lending institution will have an appraisal done after you receive an offer on your home, your real estate agent will want to compare homes with similar square footage to come as close to the final appraised value as possible.
Appraisers will not deviate more than 25% and they choose to stay within 10% of net square footage computations. If your home is 2,500 square feet, comparable homes are those that are 2,250 to 2,750 square feet.
Larger houses have a smaller square foot cost and smaller-sized houses have a larger square foot cost. That’s because the price per square foot increases as the size of the home decreases and it decreases as the size increases. To get the average square foot cost you can’t just multiply your square footage by that price. Size has to be taken into consideration.
7. What Are the Market Dependent Prices
It is only after your real estate agent has collected all of the data that they will analyze that data based upon the St. Louis market conditions and come up with a listing price for your home.
If it is a buyer’s market, you might want to make sure your sales price gives you some negotiation room, but you’ll want it to be close to the last comparable sale to bring buyers your home.
If it is a seller’s market, you could possibly add 10% more to the last comparable sale as your sales price. You can ask more and you’ll probably get it if the inventory is low and the number of buyers is great.
If it is a neutral market, you may first set your price at the last comparable sale then adjust it as the market demands.