How do Realtors determine how to price a home?
Pricing a home is not about emotional aspects. That is the reason why many for sale by owners fail. In order to price a home correctly there are many aspects to take into consideration. So, how does an actual real estate agent price a home? They’ll start by doing a comparative market analysis (CMA). This means they’ll compare your home’s features to similar properties in your area. For the CMA, the agent looks at the below factors to influence their assessment of your home’s worth:6
- Neighborhood sales – Your agent will look at similar, recently sold homes in your neighborhood to see what they sold for and what they have in common with your house.
- The exterior – What does your home look like from the outside? Your agent will factor in curb appeal, the style of the house, the front and backyard, and anything else that impacts how the house looks to everyone walking and driving by.
- The interior – This is everything inside the walls of the house. Square footage, number of bedrooms and bathrooms, appliances, and more all influence the overall market value.
- Age of the home – Whether you have a newer or older home affects the number your agent comes up with as part of their assessment.
- Style of the home – The style of your home is important because buyers in different markets have different tastes. If buyers prefer ranch-style homes and you have one, then your home may sell for a premium (aka more money!).
- Market trends – Because a local agent has so much experience in your market, they have their finger on the pulse of your area’s trends and know what buyers are willing to pay for a property like yours.
- Location, location, location – This one’s probably the most obvious. Your agent will think about how popular the area is, how safe it is, and what schools are like.
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A computer algorithm simply can’t take all of these factors into account when calculating the value of your home. The reality is, nothing beats the accuracy of a real estate agent or professional appraiser when it comes to determining a home’s true market value.
WHAT’S THE DEAL WITH ONLINE CALCULATORS?
When figuring out your home’s value, you might be tempted to see what popular real estate sites like Zillow, Redfin, and Trulia have to say. When you use an online calculator to determine your home’s value on these sites, it is just an estimate. It’s not an actual appraisal or the “true market value.” These sites all have their own algorithms for coming up with their estimates. For example, Zillow comes up with their “Zestimates” by calculating “public and user-submitted data, taking into account special features, location, and market conditions.” 5
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These online estimates can be a great starting point for opening up the conversation with your real estate agent about your home’s worth. But even Zillow recommends that you use a real estate agent for coming up with the actual market value of your home. The site says that once you get your “Zestimate,” you should still get “a comparative market analysis from a real estate agent.”
Having an agent involved in this process is essential because they understand the market better than a computer ever could. They’re showing property in your city every single day, and they know the particular preferences of buyers and sellers in the area. Young professionals, large families, empty nesters, and other groups are all looking for different things in a home. A local agent has most likely worked with all of them, so they understand what every segment in your market is specifically looking for.
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