Lisa Curlett October 16, 2018
Review the sold comparatives (comps) and assess the market trends – This is step #1. Find the sold properties in the price range of your potential new home and adjust for condition, square footage of the home, lot utility, location, etc. When reviewing the comps, you’ll need to assess the information using a state-of-the-market filter. In other words, how does the current market affect the pricing? What has happened since these comps sold? Has the market gone up or down? This is another element of the comparative analysis that needs to be considered.
Compute several mathematical equations – There are a variety of mathematical equations that will help provide valuable data points in your analysis. Again as you did with the comps, you begin with the sold properties in the price range of your potential new home. Then you turn your sights to the various equations. One is the average assessment to sale price ratio. Another is the average sale price/square foot then multiplied by the home’s square footage**. Next on the list are the average sale price to list price ratio and the average sale price to original price ratio. And there are others such as the seller’s purchase price plus cost to renovate or build***. This kind of equation can be especially relevant if the seller is “flipping” the home.
Assess the Competitive Situation – How many other homes are on the market in this price range and how many other buyers are “circling” or seriously looking at this home? For example, if there are multiple buyers making offers on the property you feel is ideal for you, the right purchase price will likely be much higher, especially if you want to eliminate your competition, win the bidding war, and ultimately be the home buyer.
Look at the Days on Market (DOM) – Timing is not everything in the world of real estate, but it certainly plays a significant role. The longer the house has been on the market and hasn’t sold, the more likely the seller will be to negotiate (see #5 below). Conversely, if the property has just come on the market, and you hear that several buyers are making offers on the property, you know these will be very close to – or over – the asking price.
Try to Understand the Seller’s Mindset – Has the seller bought another property? What’s important to the seller besides price – closing date, buyer profile, or other factors? Has the seller turned down other offers? All of these questions will give you great insight into understanding whether the seller is more or less negotiable and therefore what purchase price s/he is willing to accept. This is a crucial element in understanding the pricing puzzle.
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Advice and suggestions to help when you find yourself on the journey of selling your home.
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I’ve created this quiz, which covers a variety of aspects that go hand-in-hand with the process.
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