When you're trying to sell your home, you have to be extra mindful about how you price it. Whether done intentionally or not, overpricing your home is a dangerous move that may cost you a great deal. If you want your home to sit on the market for the shortest time possible without compromising your sale price, you will have to come up with the fair-market value of your home.
Some sellers fear that pricing their home at fair-market value is a lost opportunity to get more from the sale, but professionals guarantee that this isn’t the case. The most competitive price of your home is it’s appraised/fair-market price, and you’re more likely to get multiple offers on your home if you follow it. This will then create competition, and will inevitably drive up the value of your home, which you can then sell at a higher price.
Of course, figuring out the right price of your home isn’t something you have to do alone. In fact, it is highly advisable that you hire a professional to help you locate the perfect amount. Most listing agents will advise you via a comprehensive market analysis or CMA. And, if the CMA is done right, it eliminates the dangers of overpricing, and can ensure that both you and your future buyer can agree on a fair deal.
What is a Comprehensive Market Analysis (CMA)?
A CMA is a report containing useful data on recently sold properties within the geographical area of the home being sold. The length of the report can vary widely — some being a concise 2-3 page list of comparable home sales, and others reaching up to 50 pages that include comprehensive analyses and guides.
Although the complexity of the report would depend on the agent's business practice, an accurate and well-researched CMA will show a detailed comparison of properties in the area, as well as give you an estimate of how much your house is justifiably worth.
What does a CMA usually contain?
A CMA usually contains the following data:
Active Listings - These are homes that are currently for sale within your area. They are included in the report only for you to be aware of what you're up against in the current market. If you’re in a buyer’s market where it takes longer than usual to sell a home, it is important to know how high or how low your competition is pricing their homes. The prices of active listings in your area are not indicative of market value, since sellers can ask whatever they want for their homes. Offered sales prices do not dictate market value UNTIL they sell.
Pending Listings - These are homes in your area that are currently under contract but have yet to be sold. And since they haven’t closed, they still cannot be considered as comparable sales. However, pending listings do indicate how the market is moving. If your home is priced above these homes’ average list price, you may be looking at more time in the market. But if your home is priced competitively within their range, you could expect to get offers after the same amount of time these homeowners have waited for theirs.
Sold Listings - Typically, these are homes in your area that have closed within the past three months (“comps”), and are the homes that an appraiser will use as basis for appraising yours. These are what you have to look at closely when determining the right price for the home you’re selling. Just remember that these comps are going to vary based on the kind of market you are in. In fast moving markets, for example, sales that are more than two months old aren’t considered a reliable basis anymore. On the other hand, if the market has been slow for a while, comps could include homes sold in the past six months.
Off-Market / Withdrawn / Canceled Listings - These are homes that have been taken off the market due to a variety of reasons. Most cases are a result of overpricing, but it can also be because of a case of seller’s remorse, unmet contingencies, or seller-agent disagreements. Usually, the average price of homes in this category will almost always be higher than the average price of comparable sales.
Expired Listings - Expired listings show a list of overpriced homes. Some of them could be grouped with active listings, which means that they’ve probably been taken off the market for a time and listed as a new listing with a new agent.
How are comparable sales determined?
To create an accurate comparison of homes in the market, a real estate agent or appraiser must include all homes in your area that are similar to yours in size (square footage), age of construction, condition, upgrades, and features. Unless your property is in a rural or very low-density area, you may have to check homes that are outside the usual mile radius.
However, not all for-sale homes on the same street can be considered as comps, as some may actually be in a different school or tax district. These nuances can either make them cheaper or more expensive than yours depending on which area is more desirable.
Also, a house that is the same size as yours can be sold for 10 percent more than yours if it has specific features that address a particular need of the buyer. Modern additions such as green “eco-friendly” updates can also affect the value of the sale. Keep in mind: To “compare apples to apples,” you must closely examine the reason why a particular house is priced as it is.
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Counseling Session Activities
- Prepare the buyer for executing a buyer representation agreement
- Explain agency relationships to the buyer and get state required legal consent to represent, if needed
- Inform the buyer of working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
Building a Relationship
- Learn the buyer’s wants and non-negotiable needs
- Understand the buyer’s budget and what will be needed financially
- Help the buyer understand what property their chosen budget will buy
- Consider having the buyer fill out a homebuyer’s checklist
- Assist the buyer in examining how much they can afford to spend
- Provide quality lender resources
- Partner with the buyer to locate suitable properties for consideration
- Match the buyer’s needs with available property
- Constantly re-evaluate buyer’s needs and refocus property showings to fit those needs
- After ensuring the buyer understands what is done for them, how it is done,and the benefit to them, obtain signatures on the buyer representation agreement
- Explain how compensation is paid, who pays it, and what the buyer’s options are for paying it
Educating the Buyer
- Communicate the working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
- Explain Federal and State Fair Housing laws
- Explain what to look for in applicable property disclosures
- Reassure the buyer that their personal information will remain confidential
- Inform the buyer that you will always disclose all known material defects
- In accordance with state law, provide information on checking the sex-offender registry and crime statistics for the neighborhood
- Discuss available resources that the buyer can check to learn more about prospective neighborhoods
Preparing the Buyer
- Explain the timeline for house hunting, mortgage approval, and closing
- Explain the local market and how it impacts the buyer
- Show statistics on what percentage of list price sellers in the area are currentlyreceiving
- Inform the buyer on what home features are popular
- Identify current average days on market
- Share the dangers of using the price per square foot to figure home values
- Explain the concept of absorption rate and how it impacts the buying process
- Indicate current listing months of market inventory
- Share estimated potential out-of-pocket costs to complete the transaction
- Assist the buyer in analyzing the loan estimates
- Qualify the buyer for financial ability to purchase
- Help the buyer account for the complete costs of homeownership
- Prepare lender for listing agent calls
- Assist in comparing different financing options
- Help the buyer select for viewing only those homes that fit their needs
- Proceed in showing homes that fit the buyer’s must-haves
- Caution the buyer on posting information to social media
- Review the sample sales contract so the buyer is prepared when it comes time to make an offer
Showing Properties
- Schedule showings and provide access to all listed properties as soon as they become available in their local MLS broker marketplaces
- Educate the buyer on the immediacy of new listings appearing in their local MLS broker marketplaces and the lag time for them to appear on some websites
- Collaborate with the buyer on properties they may have learned about through their sphere contacts
- Research and assist on all unlisted properties the buyer wishes to see
- Preview properties prior to showing if needed
- Network with other agents to source properties not yet in their local MLS broker marketplaces
- Contact homeowners in focus areas to see if they are considering selling
- Set up an automated email alert system through their local MLS broker marketplaces that immediately notifies the buyer of properties that fit discussed requirements
- Arrange a tour of areas, schools, and key points of interest
- Provide resources containing neighborhood information on municipal services,schools, etc.
- Inform the buyer of negative aspects like nearby venues or operations that may result in issues that could impact value
- Collect and share any other vital information on available homes, remembering to follow all fair housing laws at all times
- Check applicable zoning and building restrictions
- Help the buyer decipher public property and tax information
- Collect and share pertinent data on values, taxes, utility costs, etc.
- Compare each property shown to the buyer’s wants and needs list and remind them of what they were looking for
- Help the buyer narrow the search until the buyer identifies top choices
Negotiating Offers
- Assist the buyer in getting the best property at the best price
- Suggest that the buyer learn more about the neighborhood prior to makingan offer
- Prepare a comparative market analysis (CMA) in advance of making an offer
- Prepare the buyer to have the most attractive offer in the current marketplace
- Explain common contract contingencies and include approved protective clauses in the purchase offer
- Ensure that the buyer receives and understands all state and federally-required disclosure forms
- Prioritize contract negotiation goals with the buyer
- Help create a negotiating strategy
- Use strategies such as an escalation clause to maintain a competitive offer
- Prepare the buyer for a multiple offer situation and develop negotiation strategies
- Write an offer that has a reasonable chance of being accepted
- Recommend optional contingencies and explain the pros and cons of using them
- Provide information on purchasing incentives that may be available
- Discuss financing alternatives
- Negotiate the buyer’s offers to arrive at the best price and terms
- Utilize hyperlocal expertise and strong communication skills to assist the buyer in being the successful offer
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