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When you begin thinking about selling your home, it’s quite possible that you are already feeling stressed and overwhelmed, before you even begin the process. This is understandable, which is why you need to make sure you are working with a great real estate agent who will expertly & thoroughly walk you through the selling process from beginning to end.
Selling your home is a huge undertaking, a process that requires lots of moving parts and a team in place to make sure it’s done in the right way. Because let’s face it, for most of us, our home is our biggest investment, so we need to make sure we are doing everything necessary to get the best return possible on that investment.
First, Education
So you’ve hired an agent, and it’s time to get to work. At the beginning of the process, your agent needs to educate you thoroughly and honestly on the current real estate market.
This includes several parts:
Comps
First, you need to understand your comparable sales, or “comps.” A comp must be:
A home that has sold within the last six months in your immediate area
or in a very similar neighborhood close by with features similar to your home.
Currently listed homes are NOT comps until they sell
So it doesn't matter what your neighbor's house is listed for because it may not sell for that price, or anywhere close to it.
Comps will help you understand how much you could get when selling your home. But comps are only a starting point.
The reason that comps are ONLY sales that have closed within the last six months is because when you have a contract to purchase your home, the buyer's lender will require an appraisal for their loan, and the appraiser only examines comparable sales within the last six months. The reason for this is because sales in the last six months best reflect current market value and conditions, since things can change vastly in the real estate market.
What happens if there are no comps for my home within the last six months?
If you live in a rural area, or have a unique home, or a home that is vastly different from others in your area, it is possible that there are no homes very similar to yours that have sold in the last six months. In this case, it is unlikely that the appraiser will go back further than six months to look for sales; rather, the appraiser will likely broaden the search radius that s/he is using to look for comps and find something that is most similar to your property and make adjustments to the value accordingly.
Your agent should be well-versed on comps, appraisals, and why it is important to determine the most accurate list price for your house.
Questions to ask your agent about your comps:
Can you tell me which comps had price reductions before they sold?
Do you have photos of all the comps?
Does that comp have the same square footage as my house?
Are there any other listings similar to mine coming on the market?
A general rule when selling a home: the more days on market = a lower sale price
Days on Market
The next part of understanding the current real estate market is “days on market.”
Your real estate agent should tell you how long homes typically stay on the market in your area, how many days on market for each of your comps, and how days on market affect the sale price. A general rule to understand first and foremost is: the more days on market = lower sale price.
A GOOD AGENT WILL KNOW THE STORY OF YOUR COMPS
For example,
"That one sold last month for $700K, but was listed last year and was way overpriced. The sellers decided to take it off the market, renovate the kitchen and then they re-listed at a more reasonable price and it sold in 3 days”
“That one sold for $30k over asking price because they listed at a competitive price in February when there was no inventory. They had 5 offers.”
"That one has been off and on the market with 4 different agents for the past 2 years"
Buyer Trends & Expectations
The last essential part of understanding the current real estate market is knowing buyer trends & expectations.
Buyer trends can include:
How soon and how many showings you should expect once your home is on the market
How soon you might receive an offer
How many buyers are looking in your neighborhood and price range
This knowledge is necessary because it will tell you if your listing is positioned right. If most listings in your area are getting 10+ showings the first weekend on the market and you only have one, that will tell you that something is not quite right, the most likely scenario being that your asking price is too high.
Not only do you need to understand buyer trends, but also buyer expectations.
For example, if you are thinking of listing your home in the $600k range, your agent could say to you, “Buyers looking in this price range typically expect an updated kitchen and a finished basement.” Or, “All the buyers I’ve met recently do not want to do any painting when they move in.”
Good agents know the kind of buyers out there and can anticipate what they are looking for.
So now that you have all this information on your local real estate market that you learned from your experienced agent [and not Zillow], it’s time to have an honest conversation.
Read Part Two: Selling Your Home? Honest Conversation
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