Hank Miller

How to Price a Home for Sale

The real estate market, nothing else, determines the value of your home.

That single sentence causes more pain among sellers than anything else; if it’s not acknowledged and understood, listing a home is a waste of time. Sellers must step back when evaluating their home and try to wear the hat of a potential buyer – not easy to do.

The definition of market value as stated in the glossary of the most recent edition of the Uniform Standards of Professional Appraisal Practice is: “The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• buyer and seller are typically motivated
• both parties are well informed or well advised, and acting in what they consider their best interests
• a reasonable time is allowed for exposure in the open market
• payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto
• the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale”

Market value has NOTHING to do with:

• What anyone thinks is the home is worth
• What the acquisition cost of the home was
• What is owed on the home

Market value is influenced by:

• Value of COMPARABLE homes in your immediate area (comparable is “a reasonable alternative purchase to the subject”. Common sense should dictate what that means!)
• Condition of your home
• Characteristics of your home
• Trends in your immediate neighborhood and area
• Local and national economic conditions

A few more cautions when real estate agents provide opinions of value:

• Many agents will overestimate value to get the listing, 30 days later they will begin the “we need to reduce price” dance.
• A reliable evaluation requires more than 3 comps. A standard agent “CMA” is ridiculously ineffective.
• Are there comps closed within 6 months, active and pending comps? Appraisers have to use comps CLOSED within 6 months, are they used?
• Question the agent, why were these homes used?
• Are these homes truly comparable?
• Are there comps from similar competing communities?

Homes priced correctly have a 95% chance of selling; 5% over market a 50% chance of selling; 10% over market a 30% chance of selling; 15% over market a 20% chance of selling. Consider that over the last year in Metro Atlanta, 62 out of every 100 listings failed to sell. Of the 38 sold listings, 25 (66%) required a price reduction in order to attract a buyer. Therefore, if 62 failed due to overpricing and another 25 required a price reduction, 87 out of every 100 listings were initially overpriced resulting in either no sale, or a sale at a much-reduced price after a much-longer listing period. So is an accurate listing price important? Is an agent that knows the market important?

Click the image to see an example of what Hound Dog calls a “Reasonable Expectations Packet”. Sellers want to know “how much” and “how fast”, this provides measured answers.

The bottom line is that this isn’t a science; if the table is correctly set for success a qualified buyer will come to dinner. Since 1989 I’ve appraised and reviewed thousands of homes, sold hundreds more. You will have a “Reasonable Expectations” brief provided (click above) and this site allows you to track trends under the Market Conditions Section. Make it a habit to check the Appraisal & Valuation section as well – an active topic during this market. The information is there, it’s up to all involved to use it effectively.

Please feel free to contact us VIA EMAIL or by phone at 678-428-8276 with any questions.

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