How to Price my House for Sale

How to Price my House for Sale
by Dave Williams

Whether you are just starting to think about selling your house, deep in the planning stage or the sign is going up tomorrow, pricing your house is the most important factor to a successful sale.
Why it’s important to price your home right.
Price it too high and you could languish on the market helping other homes to sell while your just sits there.  An over inflated listing price is often the cause of frustration to many sellers, whether they realize it or not.
While the home may be stunning a lot of people traipsing through for showings, open houses, and then the lack of offers begins to make the inconvenience…well inconvenient.  By the time you’re clearing out of your house for the 25th time, at dinner time you begin to wonder were you went wrong.  It’s a typical emotional roller coaster that all sellers go through, which gets worse when you begin to hit the bumps, and some jerk makes you a ridiculously low offer. (Link to Why they do that)
Pricing the house too low could cost you thousands of dollars and still cause the home to a long time to sell.
Shouldn’t that work the other way around? A low price doesn’t always mean a quick sales. it tend to leave people wondering what’s really wrong with the house.  It should be worth more so there’s obviously something or many things hidden.  You still may end up having to drop the price further to  get a sale.
An eager helper flips Bill Meyer's sign to sold after Bill helped his parents sell their home in Glabar Park

An eager helper flips Bill Meyer’s sign to sold after Bill helped his parents sell their home in Glabar Park

What we are talking about is less price and more a question of value for the price.

Look at it this way, if you could choose to pay $15,000 for a car off the lot…but the lot across the street had the same car with your choice of upgrades which would you choose?
What if the stock model was $10,000…which would you choose then?
It probably depends on the upgrades, right.  Are they worth $5,000 to you?  This is the same way a buyer looks at a home, 2,3,5 homes for sale in the neighborhood, all from the same builder and give or take 200 sq ft are fairly similar in design and concept.  So the buyers who already want to live in the area are comparing upgrades.  Is the hardwood worth $20,000 to me or do I buy the home with carpet and have it done for $10,000.  Do I want a pool and is it worth the extra cost? …and so the inner dialog goes on.
There are 3 different methods used for determining the market value of a home in Ottawa;
  • Comparative Market Analysis
  • Tax Appraisal Differential
  • Net Housing Price Change
Net Housing Price Change is a very rough estimate you housing values.  You take your purchase price from when you bought the home and using the net changes in real estate prices for the Ottawa market calculate an approximate value of the home today.
Eg: Say you bought your current house in 2000 for $150,000, it could be worth about $336,500 in today’s real estate market.
$150,000 2000 6.6% $7,986
$157,986 2001 10.3% $15,450
$173,436 2002 14.1% $22,276
$195,712 2003 9.0% $15,609
$211,321 2004 7.7% $15,070
$226,391 2005 3.8% $8,030
$234,421 2006 4.7% $10,640
$245,061 2007 6.4% $15,003
$260,064 2008 6.3% $15,439
$275,503 2009 4.9% $12,743
$288,246 2010 7.70% $21,214
$309,460 2011 5.2% $14,989
$324,449 2012 2.3% $7,118
$331,566 2013 1.60% $5,191
$336,757 2014
Tax Appraisal Differential is a second type of ball park valuation that gives a great rough idea of what price a home will sell for.  By looking at the recent sales in the area, regardless of type, style, or build, and then calculating the difference from their tax assessment value you can find the multiplier for your neighborhood.
Eg. Using your MPAC assessment login you find out that 4 homes have sold in your area in the last 3 months for $459,000; $379,850; $352,650; and $349,999.  According to their assessment they were taxed based on a value of $355,813; $271,321; $342,378; $315,314 respectively.  Mr. Excel tells me that homes in the area sell for an average of 1.2 times their tax assessment value.
So your house, assessed at $278,674 (x1.2) could sell for around $336,500
Finally the Comparative Market Assessment is the method used by REALTORS® when suggesting a listing price for a house, though it is more subjective than the previous 2 methods.  By taking the 3 most recent, comparable sales of similar homes to yours and making a few adjustments based on added value, current market conditions and competition.
Eg.  3 of the same model house as your have sold in the area in the last 6 months, for $345,000; $329,000; and $335,000. 
 
The first was recently (to the sale) renovated, highly upgraded and sold just before the school year started.

The second sold in the winter, had been on the market since the spring, had all the builder upgrades from a decade ago but not much since.
 
The third sold last month, was a base model but freshly painted and cleaned and was the only home on the market on the are at the time.
Now where would you price your home in comparison?
Step 1:  Compared to recent Sales:  If your home was a 10 out of 10 you might put it on the market in the $345,000 to $350,000 range, if it was a 7 out of 10 you might aim for the $335,000 to $340,000 range and if it was a 5 out of 10 you might aim for $325,000 to $330,000.
Step 2: How’s the market:  Depending on the current housing market you’ll want to swing that price.  In a “Balanced Market” you can probably stay within that range, if the market has swung towards a buyers market you’ll need to head for the lower end of the range or even ask a little bit less to get a little bit more.  In a sellers market you can price it to the top end of the range, but again a little bit less might get you a bidding war (standard practice in Toronto’s hot neighbourhoods)
Step 3: Who’s the competition:  Lastly take a good look at what is for sale right now in the neighborhood.  If there are other comparable homes up for sale right now you HAVE to be the BEST VALUE for the price, otherwise you are just helping the other homes to sell.  Otherwise your house for sale may just help them look better and sell before you.
Hope this helps you understand real estate a little better.
As always if you have any real estate questions ask them below, or contact us directly at 613-788-2113
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