When a homeowner need or decides to sell their home, nothing is more “front of mind” than the question “how much is my home worth?” Yet, week in and week out, many sellers don’t realize just how much the wrong price can affect the timing of their sale, how much they make in the end, and the degree of difficulty in getting their deal done with lenders and the buyers themselves.
So, why is getting the price right the first time so important? Here are the major reasons you need to really focus on how much you ask for your home:
Your Buyers will Almost Certainly Need a Mortgage
Only about 20% of all home buyers pay with cash. That means you have an 80% chance that, when selling your home, the buyers will need to obtain a mortgage. That means, no matter what price you get your home under contract for, the lending institution or bank that the buyer uses will order an appraisal to determine how much your home is worth and, most importantly, how much they’ll lend your sellers to buyer the home.
Why is this step critical in how you should think about pricing your home?
Well, all mortgage companies and banks use something called a “Comparative Market Analysis,” or “CMA,” provided by independent appraisers to set your home’s value. It’s a big title, but it really means they’ll look at all the homes sold within the last year or so in your neighborhood that are as similar as possible to your home (e.g. size, number of beds and baths, acreage, features like garages, etc.). They’ll compare and contrast your home with these other homes and add or subtract value based on how your property stacks up. In the end, they’ll come up with a number that’s based solely on these mathematical calculations and the sale prices of the other homes.
In 99% of all cases, this is the ONLY formula lenders use and is the sole means of determining how much to lend to your buyers. That means, they’re also in a fashion determining the price range for what you can reasonable expect to get for your home. Price your home above what a comparable market analysis says they can lend money on and, guess what, your deal falls apart when the buyer can’t or won’t come up with the difference in what the appraiser says it’s worth and what you offered it for sale at.
Your choices? Come down on price or keep beating your head against the appraisal brick wall. If sellers are unwilling to budge on price, the deal is off, as buyers can’t get financed for the home at the price you have set for it.
Again, a CMA is the ONLY method traditional lenders use for residential home deals. Your best course of action? Before you set a price, contact an expert local broker or agent adept at performing appraisal-quality CMAs. You’ll want to price your home within the narrow range they provide or you’ll really submarine the sale of your home before you get started.
There Are Good and Bad Times to Sell a Home
When you use our service here at MoneyInMyHome Cullman to get a price estimate for your Cullman area home, we provide you an instant number based on the latest market data, as well as specific appreciation rates and trends for your neighborhood. What’s that tell you that a CMA doesn’t?
Well, for sellers that have flexibility in when they put their homes on the market, charting trends and knowing when to list can mean the difference in 10s or sometimes 100s of thousands of dollars or more. Whereas a CMA shows you what you can get for your home right now, it doesn’t take into consideration how locations gain value over time.
For example, if you just rely on a CMA to price your home, you may not know that homes in your neighborhood have been appreciating at a much faster rate over the last 1-3 years and are exhibiting behaviors that show they’re values will continue to rise over the next 3 years too.
When you enter your address on our site, we show you a range of what you may be able to get for your home based on this data. That means you can evaluate whether or not – and when – to list your home for sale. Perhaps waiting a year or 6 months might even net you a big percentage increase over selling now? Knowing how your home’s value is trending is a great way to help you zero-in on what to ask for it and when to put it our there on the market.
No matter when you sell, getting all the facts on your home, its location, and its value profile can help you set your price right the first time. You’ll certainly make selling your place go a lot more smoothly and with fewer problems and surprises in the end. Get all the facts now, then reach out to a talented local broker who also knows how to use data to get you the most for your sale.
More Resources for Your – How to Price Your Home
- Zillow’s Guide to Pricing Homes
- Bankrate’s Guide to Pricing a Home
- Understanding a the Comparative Market Analysis
- How Home Appraisals Work
- How Lenders Determine How Much to Loan