How do REALTORS® and people selling privately determine the price of a property? The key element is to research the market and find comparable properties. Making comparisons is a blend of good research and market knowledge. Some basic guidelines to finding comparable homes (both sold and currently for sale) are:
- The closer in physical proximity to your home, the more comparable. Houses in Vancouver are unlikely to make good comparisons to similar homes in Ottawa. Some out of town Buyers are amazed at the market differences. There really aren't comparisons that can be legitimately made across the country or across the city. Remember the adage: Location, location, location.
- The closer in date to today for a sale or another listing, the more realistic the market indicator.
- The ability to be honest with yourself about what makes a comparison.
- The knowledge of sold prices. While you may know what your neighbour asked for his/her home, you may not know what the final sold price paid was and if there were any concessions such as decorating bonus, closing costs, redone roof prior to possession, etc.. The sold price, more than the asking price, is the real indicator of realistic expectations.
- The ability to adjust prices between similar properties that have differences. For example, adjusting the price for the difference of a two car garage in one home and only a parking pad on the other, the former will have more value. (If the garage is functional ) If one has an updated kitchen and the other is all original from 1970, then the former will have more value. While location is key and timeliness is vital, features cannot be ignored.
Be honest with yourself about your ability to get good comparisons. You may find the "Free Market Evaluation" that most REALTORS® provide is a start. Talk to people in the business. If you think a salesperson is going too low, you might want to get the opinion of two or more REALTORS®. Be wary of an estimate that seems too high - even though you would celebrate selling your home for that price. You might not have the time to have your house on the market for 6 months or longer waiting for some naive person to pay the price. I recommend having an agent help you determine the asking price for your home and to list and sell the home, thus keeping you current on changes in the market during the sale and giving you peace of mind that you are appropriately competitive and able to have your home sold.
On a regular basis, I post informationabout current selling prices in Ottawa neighbourhoods and also the sales history. Look under the "Comparable Properties Sales Statistics' category if you are interested in more information.
Photo credit: old garage @ http://www.flickr.com/photos/lafattina/3870226487/