There are several techniques used by experts in Real Estate to price a home. In this post I'm going to cover the most common and also the very best way to price a home. BTW, the best way is the least commonly used.
#1 most common is the CMA which stands for competitive market analasys. CMA's are very well known and they are based on what sold in the past 6 months within that subdivision or half mile area that compares to the subject property. A CMA is so well known across the country for selling real estate that essentially every Realtor knows what they are. The pros for a CMA is that they are so widely used that even a rookie Realtor can do a CMA. The down side is that it is based on dead comps. Think of it this way. If a buyer enters the market a week after yours comes on the market and yours is priced the highest, how will they know what sold to compare it to? They won't and they'll just wait for your price to drop. 9 out of 10 houses priced with a CMA need to have the price dropped.
#2 most common way is based off what the seller thinks their house is worth. This is pointless. If your Realtor doesn't respect his/her business enough to list your home at the price they believe it will sell for, you are using the wrong Realtor. There was a time when I didn't walk away from listing homes and if the price was well above market value I took it anyway. That is my confession and all Realtors have done it. There comes a moment in a Realtor's career that they refuse to list outside of market value.
#3 is the good ole appraisal. Appaisals are great! However, many many times the appraisal is off. What I mean by off is an appraisal is not what you should list your home for. Appraisals only go off of dead comps. How do you know if the market has changed in your favor or in the buyers favor? That's where the least used way but most affective way comes in.
And now the BEST way to price a home, Absorption Rate! What is the absoption rate? I'm glad you asked! Lets say there are 12 houses that comp to yours that sell a year and there are 12 on the Market. Then there is a 12 month supply. Now let's say you decide to place your home on the market and now there are 13. There is now an overstock. If only one house like yours sells a month, what are you going to do to make sure you are that one? If you're not the one that sold the first month and like always a new fresh house just came on the market, what will you do to be the one that sold the second month or the third. Now your house is starting to get a stigma. Homes ALWAYS sell when they are priced competitive to what is active on the market and not by what sold a year or two before. There is a lot more to Absorption Rates than I have time to discuss here, but if you want your home sold fast and for the best price give me a call and I'll be glad to help you find the perfect price to list your home for.