5 Criteria For Pricing A Home (Plus More)

When you put your home up for sale, one of the best ways to determine the asking price is to look at comparable sales. Unless your home is in a tract where few house modifications have been made, there’s rarely a perfect apples-to-apples comparison, so a pricing decision often relies on comparisons to several recent sales in the area. Here are five criteria to look for in a sales comparison.

1. Location: Homes in the same neighborhood typically follow the same market trends. Comparing your home to another in the same neighborhood is a good start, but comparing it to homes on the same street or block is even better. Appraisers usually use distance, i.e., up to one mile, as one of the selection bases for comparable homes, however a very similar home on your block will be included for value consideration over a very similar home a half-mile away.
   

2. Date of sale: It varies by location, but housing markets can see a ton of fluctuation in a short time period. It‘s best to use the most recent sales data available. Depending on other factors, home sales from the previous 6 months, and if there are many, the previous 30-90 days, will be selected for comparison.
   

3. Home build: Look for homes with similar architectural styles, numbers of bathrooms and bedrooms, square footage, and other basics. If your home is in a 1920s Spanish bungalow historic district, it's not likely that a 1962 contemporary style home will be selected even if it is not far away.  And, a condo is rarely ever considered a comparable for a single family home.
   

4. Features and upgrades: Remodeled bathrooms and kitchens can raise a home’s price, and so can less flashy upgrades like a new roof or HVAC system. Be sure to look for similar bells and whistles. However, a remodeled kitchen does not automatically raise the price of a house using the cost of the remodel.  Since remodeled kitchens and bathrooms are more common in the market, they will be a more standard basis for comparison. 
   

5. Sale types: Homes that are sold as short sales or foreclosures are often in distress or sold at a lower price than they’d receive from a more typical sale. These homes are not as useful for comparisons.  Some lenders when requesting an appraisal will not want to use a distressed property as a comparison for a standard sale, however, if a distressed sale property otherwise compares to your home, and it sold for market value, it may be accepted in the appraisal.

Other factors such as square footage:  Unless it is a very down market with very few sales and the appraiser must make adjustment calculations, a 2000 square foot house that is 4 bedrooms will not ordinarily be used as a comparison for a 900 square foot home with 2 bedrooms--it would simply fall outside the usual comparison parameters.  In that case, an appraiser is more likely to widen the search area to find a more similar property in a similar area.

An appraisal is an opinion of value by the appraiser, and sometimes one of the parties disagrees with it, in which case a buyer may request another one by a different appraiser (and probably have to pay the price for it as well).  Listing agents will usually meet the appraiser at the property and hand them comparables they believe justify the contract price.  When I've done this, most appraisers will review those properties especially when the agent is extremely familiar with the nearby sales.

Getting the right list and sell price is important for a smooth transaction, and these are the more common issues agents need to take into consideration when presenting market information so that a seller gets the proper perspective on pricing their home.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996