Have you ever wondered how a realtor determines what price tag to put on your home? Do they just make a good guess based on what other homes seem to be selling for or is there more of a science to it? Indeed, what goes into pricing a home is much more a science than a shot in the dark. There are a number of factors an agent will consider when determining a price point. Here are some of the factors accounted for.
You’ve surely heard it said, location, location, location. It’s true! The location of your home makes a huge difference. The further you get from a big city, the lower the price point is likely to be. If you have waterfront property, your home could be priced significantly higher than nearby homes without waterfront. When picking comparables for your home, an agent will pick from homes close to yours. The location will ultimately be the biggest factor in deciding the price range to consider for your home.
2. Number of Beds/Baths
One of the first factors a real estate agent is going to look at when pricing your home, is the number of bedrooms and bathrooms. Once they get this count, they can determine what listings in your area are comparable. For instance, if your home has 3 bedrooms 2 bathrooms, it will likely be compared to homes that are 4 bed 2 bath, 3 bed 2 bath, or 2 bed 2 bath.
3. Square Footage
The next thing agents will look at is the square footage of your home. While it may not be the biggest factor, it helps determine which comparable homes to use. You wouldn’t necessarily want your 1,800 sq ft home compared to a 1,200 sq ft home. While they may have the same bed and bath count, they will likely be much different price-wise.
4. Age of the Home
Another factor included in the mix is the age of the home. The agent will look at the age of your home compared to others in the neighborhood; whether your home is older, newer, or of similar age to the homes around it. This will help determine if your home should be priced similarly, or higher or lower than the homes around it.
5. Other Listings in your Area
Once your agent has taken a look at your home’s credentials, they will put together a list of comparable homes in your area. The homes on this list, should be pretty close to your home. Ideally, within a few city blocks in all directions. The list will be based on the bedroom and bathroom count, the age of the home, and the square footage. The agent will look for 2-3 closely matched homes that are currently listed, 2-3 that are pending, and 3 or more that have sold recently (i.e. in the last 6 months or less).
Once this list is compiled, the agent will then compare the other features of your home to those of the homes on the list. For instance, lot size and interior updates (if known). Another factor that might be considered is whether your home or any of those on the list are on a main arterial.
Before seeing your home in person, the agent will use the above-listed info to get a ballpark value for what your home might be worth. Once, they see it in person, however, they will be able to fine-tune their analysis based on the more finite features of your home.
For instance, when your kitchen was last updated, whether you have wood floors or not, whether the bathrooms have any updates, what landscaping your home has, etc. The agent will then compare your homes condition and updates to those of the other active and sold listings on the comparables list.
7. Immediate Surroundings
Another factor that goes into consideration is the immediate surroundings of your home. For instance, is there a convenience store across the street? Or maybe you have a water tower in your back yard or a beach. This is another factor that helps determine the price of your home compared to others in your neighborhood.
Adding it all up – What goes into pricing a Home?
Once the agent has evaluated all of these factors, they will give you a number, or potentially a few numbers to consider. Some agents might give you a couple of price options based on your goals. For instance, if you want to sell it immediately, they might give you a price that is slightly below market value to ensure a quick sale. If you have time to wait, they might suggest pricing slightly over market value to get you the best deal when people bring offers. And, they might just recommend pricing it right at market value. It just depends on your specific needs.
If the market is piping hot in your neighborhood, they might suggest pricing at or below value in order to generate a multiple offer situation where you could end up getting more than the list price.
Regardless, every agent should do their research. A good agent should be able to show you the comparable homes they chose for your home and should be able to explain clearly their reasoning for the price they recommend.
Now you know what goes into pricing a home. If you want a generalized idea of what your home could be worth, try out this instant home value tool on our site here. If you would like a FREE custom home valuation, let us know here.