April 28, 2017 6:05 am
For most people, selling their home, and especially pricing it for a sale, can be quite emotional. Besides the memories, there are all types of investments that have gone into the home (from sweat to time to money). So, it’s natural that when people learn that the value of their home is less than expected, they can get upset. However, if people understand the factors that affect the market value of their homes, they are often better equipped to deal with the reality.
A house is a product in the market, and like any products in the real market, it will be affected by the supply and demand in the industry. When there are more sellers than buyers in the market (aka “a Buyer’s Market”), the home sellers need to compete on price to make their home attractive to buyers, and vice versa. Both trends are shaped by many factors in the global economy. For example, the 2008 crash dropped home values significantly on a global scale, which shaped that period as a buyer’s market. Now as the economy seems to be recovering, or at least we hope it’s recovering, there are more home buyers than sellers (aka “a Seller’s Market”). In this case, buyers are willing to bid up home prices to buy the house of their choice. This has shaped the period into a seller’s market. To sum up, market conditions are an important factor affecting public opinion and the value of your house.
Your motivational level to sell:
When shopping for clothes, you can find sales easily if you’re motivated to hit the big sale of the season. Yes, it’s about a month before the end of the season. Retailers are highly motivated to get the inventory off their shelves so they slash prices aggressively. Selling your home works much the same way. If you are highly motivated to sell your house quickly, you must price it more attractively (to the buyers) compared to similar homes in your neighborhood. On the other hand, if you are not in a rush and can handle the monthly mortgage, your pricing can start at a higher point. But remember, don’t price your home too far above the average price for a similar home in your area or you will miss the buyer’s interest completely.
The unique features and layout of your home may add more value. For example, your house may easily divide up into a duplex, which is often attractive to property investors. Or you might have upgraded items that added value to your home. Upgrades that can possibly add value might include a new roof, a three-season porch or deck, a kitchen remodel, or handicap accessibility.
“Location” is the key differentiating factor for value when comparing similar homes. Community features such as a nearby shopping center, top-rated school district, peaceful neighborhood, family-friendly parks, etc. are what make your community desirable and unique. Some features even add as much as $100,000 or more to a home’s value, such as lakefront property, distinguished school districts, booming towns, etc.
Exposure to the market:
The marketing approach your agent will take to listing your home can make or break the sale. A professional agent should provide a prelisting consultation to make you aware of their planned strategy for promoting your home. Here are the common steps a professional agent would take when listing your home:
- Walks the home with you and recommends things you need to quickly adjust and stage for professional photos.
- Schedules a professional photographer to take pictures and videos of your home.
- Posts your home for sale on property listing websites like MLS, Zillow, Trulia, etc.
- Posts a “For Sale” sign in front of your home, where allowed.
- Designs a property feature sheet or brochure for potential buyers.
- Discusses other marketing techniques to get the most exposure for your home.
Once your home’s value is determined, don’t take it personally if the value is less than you expected. It is just a real-time factor of the economy, combined with the price buyers are willing to pay in your community. At the same time, if a buyer makes an offer less than your price, they are not out to insult or cheat you; and if they offer more, they aren’t intending to make a donation on top of the sale price. It’s just the way the market shapes what buyers are willing to offer to become a homeowner in your neighborhood at that time. As the economy changes, so does the current “value” of a home and the price buyers are willing to pay for it.
I hope this article is helpful in explaining why a home’s value will vary from time to time within the same neighborhood and how certain factors contribute to the change in real estate values. If you find this article helpful, please share it with others who you believe can benefit from it as well. For future articles, please subscribe to our posts. Thank you!