If you're about to put your house on the market, you're probably wondering, "How much can I get for it?" And indeed, you and your real estate agent should be checking out the competition (or "comparables," in real estate lingo) and figuring out your house's likely market value. But that's just step one in a two-step process that typically involves:
- Figuring out your home's likely market value, and
- Settling on a list price that will most effectively bring in offers at (or above) that value.
Appraising Your Home's Market Value
Real estate prices can fluctuate quickly and widely, which is why it's important to look at a number of sources in appraising your home's current value. Several tools are available to help you develop a solid appraisal:
The Multiple Listing Service (MLS). Kept by real estate agents nationwide, this database tracks homes that have been bought, sold, and everything in between. Although the public can access the data on homes currently for sale, the agents have access to a lot more. Your agent should be pulling out details on homes sold recently (within the past six months; or three months if your market is shifting quickly) in your area (within a quarter to one half mile, while adjusting for any dramatic changes in neighborhood). Important details for the agent to research include the price each house sold for, how much time it spent on the market, and whether the selling price was reduced or bid up from the original list price. Your agent should also be analyzing the prices of sales currently pending (awaiting the closing date), which are the most up-to-date indicators of prices in your local market, and aren't public information yet.
Websites containing past sales data. For example, check out www.listingbook.com, www.trulia.com, or www.zillow.com. Although these online searches will yield less sophisticated data than your agent can get from MLS searches, they're a fun and ultimately useful way to educate yourself about the market. Simply enter your address and pull up sales prices for recently sold homes of the same size as yours in your neighborhood. If you've ever visited or walked by these houses, you may know some facts that the websites won't tell you -- such as whether the owners either added expensive landscaping or let their back yard turn into a junk pit -- all of which will help you develop a sense of home values in your area.
Local and national economic news. Even when you're getting close to arriving at your home's market value, realize that local and national trends can change real estate prices quickly. Keep an eye on whether home prices in your area are trending up or down, where mortgage rates are going (the lower the interest rates, the easier it is for buyers to afford a home), the latest unemployment figures, and whether local homebuilders are feeling confident enough to start building new homes.
Online estimates of your home's value. Online sites such as those mentioned above will give you an estimate of your own home's value based on information drawn from public records about the house and of past sales of (theoretically) comparable properties. Don't be surprised if your estimates (or in Zillow-talk, your "Zestimate") look to be way off the mark, or even tens of thousands of dollars different from each other. As many experts have commented, generating a number via a computer algorithm is no substitute for having a live human not only check the accuracy of the basic data, but adjust for all the factors the computer can't see. But here's the main reason to check your online estimates: Buyers will be looking at them! If the estimates are far lower than your list price, they may underbid. If the estimates are far higher, that's better -- but cases have been reported of buyers who shied away from such houses, worried that the seller knew of some deep dark reason that the place wasn't worth what the online estimates said it was worth. Be proactive about your online estimates, particularly if they're low -- you can go onto the sites and enter data about your own house, which will both give the public a better sense of the place and might actually raise your estimates.
Your home's sales history. You know how much you chose to pay for your home and probably how it compared to other houses on the market at that time. Think back to when you bought. Did a certain factor, like the house's fabulous view of the city at night or big kitchen, make you fall in love with it? Although you're a sample of one, this and other information about your house's past sales -- which your real estate agent can pull up for you -- can be instructive about things like whether buyers consistently perceive your house to be more (or less) desirable than the supposed comparables.
Local listings and open houses. Reading the local ads and visiting open houses yourself can also provide some guidance. Check newspaper real estate classifieds, and look online at sites such as www.realtor.com. Of course, asking prices don't always reflect what the houses will actually sell for, so you'll need to factor that into your calculations of your home's actual value. But it will tell you what other sellers think is an appropriate list price for a comparable house, which will be relevant to the next part of your analysis, below.
After you and your agent have gathered all this information together, you should be able to put a dollar figure -- or at least an estimated range -- on your home. Then it's time to figure out whether that number is what you should actually use when listing your house.
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