Setting the right price from the start is among the most important steps toward successfully selling your home. This requires taking a close look at what other houses are selling for, so as to judge the relative value of your property. No matter how priceless your remodeled kitchen or finished basement are to you, the market sets a value—the price a buyer is willing to pay.
One of the key ways to compare your house to others on the market is to look at or create a comparative market analysis, or “CMA.”
A comparative market analysis is a report, usually compiled by a real estate professional soon before someone's house goes on the market. A CMA contains information about selling prices of houses similar to yours in size, amenities, and location, which are either on the market now, have recently sold, or were listed but expired (usually, because they were priced too high and no one bought) within a reasonably recent time period.
These other houses are often referred to as "comps." Not every house near yours is a "comp," however. A significant change in the neighborhood, such as if your house is just below a freeway bridge and a house three blocks away is blissfully unaware of the freeway, can make a huge difference in value.
It's ideal to have your CMA look back no more than three months when the market is in transition, and no more than six months in a more stable market.
A good CMA can tell you:
If you have the opportunity (on your own or with your real estate agent), visit some comparables that are still on the market, to see how they compare to yours in terms of price and other features.
If you're working with a real estate agent, or even just interviewing agents about listing your home with one of them, the agent should prepare a detailed report for you. An experienced agent will have visited many of the homes listed in the report, which is great for helping you to understand why, exactly, each one sold for the amount it did. For example, the agent can evaluate not only raw data like square footage and the age of the home, but its exact location, any home improvements that might have been made (for better or for worse), the style of home, and so forth.
If you're selling your home without an agent (a for sale by owner or FSBO), or simply want to do some research on your own, keep reading for ways to get comparative pricing information.
Some websites, such as realtor.com, offer comparative market information for free. You can either scan lists of homes that have recently sold or get a report prepared by a local real estate agent, who will contact you and probably try to solicit your business at that point.
Alternatively, you can purchase a CMA report, for example, at www.ushomevalue.com. It will list several comparable properties that have sold in your neighborhood, with oversight from an actual human being. That's a step up from what you'll get from online, automated appraisal systems like those on www.zillow.com, which estimate a home's worth, but aren't always up to date and don't take into account a home's special features and aesthetic appeal.
When you bought your house, the bank probably required you to get it “appraised”—that is, have a professional view it and put a dollar figure on its market value. But you can pay a few hundred dollars to get an appraisal too, just to evaluate your house's market value. Ordinarily, the appraiser will give you a report that arrives at the value of your property by comparing it to others that have recently sold. But keep in mind—in most case, the appraiser won't have actually have seen the comparable properties.
Although it's the least scientific measurement, open houses in your neighborhood, even at houses that aren't quite comparable to yours, will also be informative. Viewing other houses helps you get a real sense of what drives list prices up and down.
Looking at open houses can be especially useful if you live in a development and there are similar houses for sale. You'll need to think like a buyer when comparing houses that you think are nearly identical—especially when it comes to kitchens and any special amenities, such as a fireplace.
With the list of comparable properties, the opinions of agents, a possible appraisal report, and your own hard look at your house and others, you'll probably arrive at a likely value—or at least a range, most likely within around $10,000 to $25,000 of the market value. The next thing to consider is How Much Should I Offer for a House: List Price, Higher, or Lower?