When you discuss with your real estate agent how to to price your home for sale, you'll be looking at a number of similar homes that sold recently... they are nearby, about the same size, same condition, and have about the same features as your home. Naturally, you'll find that prices can vary by the thousands of dollars... higher or lower... and, it is very tempting to pick just the highest one and say, "Let's list my home at that price, too."
But what if your home doesn't sell at that top price?!
Setting a high price is a strategy that can work well in a market that is quickly appreciating... but even then it's still risky. In our current market where we see only small price increases from quarter to quarter your home could sit for months without selling, without even an offer for that matter... and you'll end up reducing the price as the months slide by... perhaps even getting to low... lower than it should have sold for in the first place.
Pricing your home is an art, a science... so to choose the right price at which your home will sell quickly and profitably. How do you do that? The short answer is: by carefully analyzing your local market conditions and pin pointing where your home fits in... finding it's CURRENT market value!
The only way your home will sell at the highest price possible is when your buyer is recognizing and realizing your home's value... guided by his or her buyer's agent... armed with the very same tools your seller's agent just employed.
They are: the CMA, an appraisal, and your agents knowledge of the local market.
The comparative market analysis
A comparative market analysis (CMA) is an unbiased, side-by-side comparison of similar homes for sale as well as homes that have recently sold in your neighborhood... and comparing it in the end to yours.
Real estate professionals use a CMA to create an educated price opinion by comparing the features that make each home unique, including size, age, location, condition, style, updates, upgrades, number of bedrooms, baths, rooms, etc.
It will make it easily clear where your home for sale fits in... in the top, mid, or lower price range of similar homes. For example, if a similar home to yours has been recently updated with a new kitchen or bathrooms, expect it to sell for more than your home if your home has not been improved in those areas and all other things being equal.
The real estate appraisal
An appraisal is an even more detailed market analysis performed by a trained and licensed real estate appraiser using a variety of sources, including multiple listing system data and conforming loan formulas... and you can always hire an appraiser and compare the resulting appraisal to the price opinion generated by your agent... just to make sure.
Your agent's local market knowledge
Your real estate agent has also access to a variety of relevant data that may not be public or available through the Multiple Listing Service. Many keep track of their own current sales results and other data, such as the number of listings on hand, which neigborhoods are the hottest, whether closings are trending up or down over certain time periods, etc., etc., etc.
Your Realtor knows and uses all of this data to help you to come to the right asking price for your home... high enough to reflect your homes value, but attractive enough to entice potential buyers to make an offer... and in the end getting it sold quickly and profitably.
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