When Selling Your House, Proper Pricing is Critical

When Selling Your House, Proper Pricing is Critical

by Brandon Cornett

As the financial crisis continues to unfold in the U.S., many home sellers have found themselves in a bind. Prices have dropped, banks are failing, and home buyers are having an increasingly hard time getting mortgage loans.

So how does one go about selling a house in the current economy? For starters, you need to price your home properly. The pricing process intimidates a lot of sellers, especially those who are handling the process by themselves (without an agent). But it doesn’t have to be scary or confusing. Here are some tips to help you get it right.

1. Detach Your Emotions

When you live in a home for a certain length of time, you develop an emotional attachment to it. This is perfectly natural. After all, it’s your “safe haven” from the world. It’s where you go for privacy, security and relaxation. It might even be the place where you witnessed your child’s first steps, or their first day at school.

But the thing to keep in mind when selling your house is that emotional value does not carry over into financial value. In other words, you can’t price a home based on the memories it holds or the good times it has given you. You cannot set the selling price based on what the place is worth to you. Instead, you must base your numbers on what the house is worth in the current market, based on the concept of comparable sales that we will discuss below.

You might think this is something of a no-brainer or an obvious point. Yet, you would be surprise by how many sellers let their emotions get in the way of real estate reality.

2. Research Comparable Sales in Your Area

The pricing process will be much easier for you when you research comparable sales in your area, as well as homes that are currently listed for sale. The real estate terminology for this is “comps,” short for comparable sales. Here, we are talking about homes that are similar to yours that have been sold in your area recently. By using this information, you can determine your own price — and it will be based on real data, not on emotions.

If you decide to work with a real estate agent during your selling process, this will all be easier for you. This is one of the things an agent will handle for you. They refer to it as the comparative market analysis, or CMA. If you would rather handle the pricing yourself, you can do that too. Agents get their data from public information, not from some private source. They look at the same thing you could look at — recent sales data on similar homes in your area.

3. Consider Supply and Demand

This is always an important consideration for sellers, but right now it plays a major role. Due to recent economic events, the supply and demand of real estate is skewed like never before. The subprime mortgage crisis has led to record numbers of home foreclosure, which drives up the supply of houses. But it has also become much harder for buyers to qualify for mortgage loans, which decreases the demand. When supply goes up and demand goes down, it becomes a buyer’s market. This is what’s happening in most cities across the country right now.

Of course, there are some anomalies in certain cities across the U.S. For example, I live in Austin, Texas, and the market here has not suffered as badly as other cities. The reasons are twofold — (1) our housing prices were not artificially inflated before this crisis, and (2) there is a high rate of immigration as people relocate here from elsewhere in the country.

To figure out the supply and demand situation in your area, you’ll have to do some homework. Your local newspaper is a good place to start.

Conclusion and Going Forward

It may be harder to sell a home in today’s market, but it is by no means impossible. The key is to go into the process with proper research and expectations. If you do your homework and price your home based on real market conditions — and if you do a good job preparing and marketing the property — there is no reason you can’t sell in a reasonable amount of time. On the other hand, if you have conjured your asking price out of thin air, you will be in for a rude awakening.

© 2009, Cornett Communications.

About the Author: Brandon Cornett is a consumer advocate and publisher of the Home Buying Institute. You may visit the author's website at www.HomeBuyingInstitute.com to learn more about this topic.