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 to judge the relative value of your home. No matter how priceless your remodeled kitchen or finished basement are, 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 a comparative market analysis, or “CMA.”
A comparative market analysis is a report, usually compiled by a real estate professional right before your house goes on the market. A CMA gives you information (sometimes referred to as “comps”) about houses similar to yours (in size, amenities, and location) that are either on the market, have sold, or were listed but expired (usually, because they were priced too high and no one bought) within a reasonably recent time period. 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:
It’s especially important to pay attention to the prices of pending, rather than closed, sales, for the basic reason that they’re the most recent.
And if you have the opportunity (on your own or with your real estate agent), visit some comparables yourself to see how houses on the market compare to yours in terms of price and other features.
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, here are some ways to get comparative pricing information,
Some websites, such as www.homegain.com, offer comparative market information for free. You can either scan lists of homes that have sold or get a report prepared by a local real estate agent who will contact you and probably try to solicit your business. If you don’t mind the hard sell, it’s a way to get the information even without hiring the agent.
Alternatively, you can pay a small fee for a CMA report, generated online. For example, at www.ushomevalue.com, a small fee will buy you a one-time “appraisal emulation report,” which lists several comparable properties that have sold in your neighborhood. That’s a step up from what you’ll get from online appraisal systems, like those on www.zillow.com, which will estimate your home’s worth, but aren’t always up to date, don’t take into account a home’s special features and aesthetic appeal, and won’t give you immediate access to the comparative information that underlies their estimates.
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. Usually, 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.