Home ownership is an emotional and financial investment. You commit to paying a mortgage for perhaps 15 to 30 years of your life, and a house is where your personal, familial and financial growth happens.
When you live in a home for any length of time, that dual bond grows. Every splash of color you add to your walls and every irreplaceable family moment you experience adds to your connection to the property.
When it comes time to sell a house, however, emotion is often the driving factor in owners coming up with a sales price. Unfortunately, emotion has little to do with market reality: the price at which properties sell.
I wish it were different, because my house would be worth billions of dollars. But it’s not, so let’s talk about how to get a realistic view of what your home is worth.
The first step is to hire a real estate agent who specializes in your area. A good agent will do a comparative market analysis, which includes evaluating other homes in the area that have sold with similar square footage, lot size, amenities and so on.
Agents who specialize in your area have been inside many of the other homes on the market. They know what homes are going for and will make price adjustments for things like remodels and additions.
A lot of homeowners think they can zero in on their property value by doing research online. I encourage that, but sellers shouldn’t make the mistake of looking at list prices of homes for sale versus actual selling prices.
List prices mean nothing, because there are plenty of properties listed well above what they are worth. Homes priced too high tend to sit on the market for long periods of time, which decreases their salability.
If you’re going to do your own research, look at comparable sales. Homes priced at or slightly below market tend to sell quickly and sometimes for more than the asking price. Buyers are savvy these days and know value when they see it.
Some folks think hiring an appraiser is the best way to get a realistic view of their home’s value. Appraisers provide a valuable service to the real estate industry, but they are expensive and sometimes their numbers can be off.
They generally go by raw data, instead of going inside both the home being appraised and homes that have sold in the area. They often call real estate agents to find out the latter information, and may overlook negatives (such as being located next to a freeway).
In my opinion, an appraisal is not really a true indicator of a property’s value. And three appraisers can come up with very different numbers. Also, once you find a buyer, the buyer’s lender is going to order an appraisal from one of their own sources.
Whether you’re doing it yourself, working with a local real estate agent or hiring an appraiser, the key is to be objective about your home’s market value.
It can be hard to not get emotional if your property value has dropped. But remember that the point is to price your home correctly so that it sells—then you can start creating an emotional and financial connection to a new home.