THE HOME BUYING & SELLING PROCESS - THE SALE PRICE

What is the right price for your home? It would be nice to know you will get what you ask for. However, we all know that the chances of anybody making an offer on a house priced too high is slim to none. At the same time, a price too low can leave money on the table.

Home prices follow the long proven economic theory of supply and demand. More demand drives prices higher for a given supply. More supply drives prices lower for a given demand. The balance of prices follows the interaction of supply and demand. The addition of indirect market drivers like jobs and inflation make it very difficult to derive a simple formula.

One quick and effective way to set a price for your home is to first analyze market data for recent sales. This data reveals current prices that Buyers are paying. As long as there are no other changing conditions in the economy, you can expect that prices will be the same and Buyers will continue to pay it.

Agents are trained to identify economic trends and have access to an enormous amount of data through association memberships. Most importantly, they have access to all current and historic home sales data through their MLS. This information is provided by subscription only and not available to the public.

Many online real estate portals now provide estimated values and sales data based on public information, such as tax assessments and listing prices. However, Texas is a non-disclosure state meaning that you are not obligated to reveal the actual sale price - even to the government. As a result, these online portals can only attempt to estimate home values. It is reported that these estimates can be as far off as 40% and normally only within 20% (source: zillow.com).

One of the main reasons that online portals are inaccurate is because homes are often sold for less than they are listed. Because of this, portals have to guess at the actual sales price and will use the listing price if no other information is available. The sales listing price is usually publicly advertised, but the actual sales price never is.

Your Agent is obligated to provide you with a cost estimate for your home. This is most often done with a Comparative Market Analysis (CMA). This analysis is performed with MLS sales data that is recorded for every listed home sale after the sale is completed. This data is exclusive and not even available through county records.

A CMA gathers sales data for homes sold near your home. The data will include the sales price and primary features of each comparative home, such as number of bedrooms, bathrooms, living area, year built, etc. An accurate calculation of fair market value can be made by comparing this data with data about your home.

A small range for your home’s market value is normally provided from a CMA. This accounts for small variations between your home and the sales data from comparable homes. As the price varies away from this small range, the risk becomes higher. A price set too high for your home will almost always leave it on the market for a much longer period of time waiting for a Buyer.

It is possible that the right Buyer will come along and pay a price higher than market value for your home. These Buyers are a very small population and their rarity drives up the risk that you may never find them.

Agents have access to critical data needed to determine a fair market value that can be used to set the sale price of your home. Ultimately, you must decide on a sale price before you list your home. With the right information, you can have confidence that you are listing it at the optimum price.