What’s My Home Worth? The Truth

When deciding whether it is right time to sell, the first question many people want to know is “what’s my home worth?”

I’m going to let you in on a little secret…

It may be worth less than you’d hoped.

I realize we’ve never met, and I don’t know the first thing about your home. However, in most cases, we as home owners tend to look at our own homes with rose-colored glasses and think it is worth much more than a buyer would pay for it. We get familiarity blindness to that half-finished project in the dining room, that hole in the carpet, and a bunch of other things that a prospective buyer would notice right away.

I once heard it said that “we want other people to pay for our memories.”

In other words, your house may be the place where you got married, raised a family, and made many other great memories. When you look at that house, there is value in the sentimental. Obviously a buyer really doesn’t care about those great memories, so there is often a disconnect between what we feel our own home is worth and what the market says our home is worth.

Obviously that is a generalization, your house may well be worth more than you think! Either way, deciding what to list your home for should be based on numbers and data more than emotion.

What Really Matters

When figuring out what’s my home worth, you should do your best to take that sentimental value out of the equation. Home values  can fluctuate rapidly, and just because you paid $150,000 for your house 3 years ago doesn’t mean you can sell it for more than that today. Obviously the condition of the home and the improvements made have an effect on price.

However, more important than that is looking at the real data of what has sold and what is on the market in your local area. You may have heard the term “comps” which refers to comparable properties. Generally you want to look at homes of a similar size and construction that have sold nearby, within the last couple of months. Distance is important, but your house could be in one school district and the next street over could be in a different school district. If one of those school districts tends to raise housing prices more than the other, that house may not be a great comparable to yours.

The short story is, if someone just paid $120,000 for a house very similar to yours, right down the street, you shouldn’t plan on selling your house for $140,000.

Besides those that have sold, there are a couple other property types you can look at to determine what your house is worth. You can look at expired listings and active listings. Expired listings are those which sat on the market, usually for 6 months or more, and did not sell. If it is a truly comparable property, this can be an indicator of what price is too high for your house.

Active listings are those houses on the market right now, AKA your competition. If your neighbor, who has a similar house to you, also has his place on the market – you better take into account what he is selling for. Again, knowing how long your competition has been on the market, if they’ve had to reduce price, etc. will help you get closer to a listing price for your own home.

Don’t Price Too High

As a realtor, it can be a little uncomfortable when discussing a listing price if the homeowner has an inflated value in mind. Often the homeowner has very good reasons for thinking the home is worth that price. For instance, “we added in granite countertops and high end appliances, that was a $10,000 upgrade!” No matter how great the upgrade, it all comes back to what the market is willing to pay. If your house is the only one on the block with those upgrades, then a buyer in that neighborhood isn’t really expecting a high end kitchen and likely won’t be willing to pay for it. A buyer who insists on high end appliances and granite countertops will usually look for a house on a street where those type of upgrades are the norm, and the home values reflect it. Ron Phipps, of Phipps Realty in Rhode Island put it this way “Installing a $10,000 stove in a $200,000 house, for example, just doesn’t compute.” Click here for the rest of the article on home improvement ROI.

That can be a tough conversation to have, but you want a realtor who is honest enough to have it. Their goal should align with yours, which is usually to sell the home quickly, for top dollar. However, their needs to be a level of trust that they know about what that “top dollar” is. In my opinion, that trust needs to come from a hard look at the data for both of you. The numbers of comparable properties that we discussed earlier should lead you down a path to where you and your realtor can agree on a data-driven listing price.

Listing your home too high can be quite an inconvenience at the least. Most of the time you won’t get many offers, and if you do they will be closer to the market value for your home. You may waste a lot of time keeping your home “ready to show” and depersonalized, as any good home stager would tell you. After awhile, leaving your house for every showing to a half-interested buyer gets very old! For your sanity, you’ll be glad that you dug into the data and got the price right from the beginning.

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