This presentation will cover the time line of selling your home. You may jump to any of the topics below if you like. Or just read through the entire presentation to learn what you will need to know.
Why are you selling? And why is this question so important? Because ultimately it will determine your asking price. And your asking price will determine the amount of time you can expect to be "on the market".
Let's say a home just like yours sold yesterday for $400,000. And now you want to list your home and achieve the same result. How much should you list your home for? One clue would be how long your neighbor was on the market. If he was listed at $435,000 and was on the market for 6 months, you can probably expect a similar marketing time if you ask $435,000.
But what if you have a new job and would like to sell in 2 months? Your best bet would be to bring your list price much closer to your likely selling price of around $400,000. So maybe you might select a list price of $415,000 based on your motivation. Now let's say you have a mortgage of $390,000. If you sell at $400,000 and pay a commission of 5%, you will be left with $380,000 and will be "short" $10,000. That is $10,000 you will have to bring to the closing table to complete the sale. You really need to net $410,000. How much should you list your home for? Well you could list it at $435,000 like the neighbor. But if you do that it will probably take longer than the 6 months it took your neighbor to sell at the same asking price. If you are not that motivated to sell quickly, but need a little bit of extra money, then you might want to list at $435,000 and wait longer. Or make some improvements to the house and try to make it a better value than the neighbor was.
The bottom line is it all comes down to your motivation. If you want to sell quickly, you need to price your home very close to the expected final selling price based on an analysis of very recently closed sales. If you want to sell for a higher price, you have to be comfortable with waiting and being on the market for a longer period of time.
This is a perfect illustration of the phrase: Time is money.
So, when I come up to discuss listing your home, one of my questions will be: "What's your motivation"?
If you need to sell quickly, you will need to list close to your anticipated selling price. If you have more time, you can try to attract a somewhat higher offer.
OK, so we've examined our situation and we have some idea of our motivation. On to the next step. Determining the asking price.
For most people selling their home, determining the asking price is "The Big Decision". And it is the single most important factor in determining how quickly your home will sell, or even if it will sell at all. It would be a difficult decision without emotional involvement. But of course emotions are hard to avoid when its time to sell your home. After all, it's "your home"!.
Nonetheless a very rational and unemotional process has to take place, and it has to consider answers to the following 10 questions:
1) What is the local real estate market doing in general? This is known as market conditions.
2) What homes have recently sold that are a good match for your home? These are known as comparable sales, or "comps" for short.
3) What homes that are a good match for yours are presently on the market? These homes will compete with yours. These are called active listings.
4) What homes that match yours have failed to sell? And why? These are known as expired or withdrawn listings. A withdrawn listing is a home that is removed from the market before the end of the listing contract by the owner or his agent. An expired listing is a home that fails to sell during the period of the listing contract and is automatically taken off the market on the expiration date of the listing.
5) What homes that match yours are presently under contract? These are called pending sales.
6) What price do homes actually sell for in relation to their asking price? This is called the sale-to-list ratio.
7) What is there about your home that is different than the others? There are going to be several key factors that might be different in your home from some of the other close matches. What are they? And how much is that difference worth? These are called market adjustments.
8) What is your motivation to sell?
9) If you have a mortgage on your home, will the selling price you hope for pay off the entire mortgage and allow you to move forward? Or will you be "short" if the hoped-for sale price cannot be achieved? And if that happens, then what?
10) Quite frequently, things will happen after you go into contract that will alter the selling price. A home inspection item may need repair or replacement. Or the buyer may request something in the house that you weren't planning to sell. Or the appraisal may come in too low. You may want to think about that possibility in coming up with an asking price.
So now let's cover these 10 questions one at a time. Click on Price part 2.
Market conditions are the economic forces that act to change housing values in the neighborhood. An example would be employment prospects. If an area features strong job growth, that will create a market condition that acts to raise housing prices. Layoffs in the area could have the opposite effect. A major company moving in will create a positive force on prices.
Another example would be environmental factors. Let's say a nearby industrial site is discovered to have polluted local water supplies, and let's say homes in the area use well water. That can create an adverse market condition that would depress prices. In Pompton Lakes such an area was discovered in the 1960s. It is now referred to as "The Plume". Homes in this area sell for less than they would without this negative market condition.
Let's say a commuter rail station opens near a particular neighborhood. That can act as a positive market factor that will raise demand in areas nearby. Especially within walking distace. That is why there is very strong demand and very high prices for homes in "train" towns like Madison, Chatham, Short Hills, etc.
If you look at this article about the hottest markets in northern NJ, you will see that most of these towns have access to commuter trains. This creates a very positive market factor.
So how does this translate for me if I am pricing your home. Do we need to identify the specific market factors that affect your pricing. We will in a general sense for purposes of marketing, stressing the locational positives. But for pricing, we need only look at the trends in the area over the past year to see if the bundle of market factors affecting your neighborhood are resulting in a net positive or negative effect.
Price Part 1
Price Part 2