How Do Real Estate Agents Determine Property Prices
Whether you’re buying or selling, surely you’ve hit the MLS matrix and wondered, “Why on earth is that home priced like that?”, and whether that’s in a negative or positive light, there are several key factors that are taken into consideration when determining property prices.
Many people don’t understand how these factors determine the final price of a property, and may feel like listings are over-priced or under-priced. We’re here to explain exactly what information is used to determine a price, and assure you that every final decision is based on research and years of industry experience.
First and foremost, prices should be set based on analysis of comparable sales, not emotions. Property values are hyperlocal, down to the street or neighborhood where the house lies. Because of this, we rely on comparable sales, aka “comps”, to price individual houses based on similar properties that sold in the past 90 days. A comparative market analysis puts your home side-by-side against other recently sold properties similar to yours in location, size and condition. The idea here is to size up the competition and nail down a general price range which you can adjust based on your home’s unique features.
Another factor is knowing your market, and the season. A supply / demand imbalance gives either buyers or sellers the upper hand. In a buyer’s market, for example, we’ll want to set a price below competition to help the property stand out from the noise and reduce days on the market. Underpricing is also a good move if the home is on the older side and needs upgrades or repairs. Oftentimes, a lower asking price will generate more than one offer and create a sense of urgency among buyers, resulting in higher bids.
Season is also a huge factor, especially in our mountain area. It’s possible to boost profits on a house by over 75% if you sell at an opportune moment. Covid has kind of thrown these stats for a loop this year, as we’ve seen higher market trends in our area in certain months than the average in years past. Some websites offer a best time to sell calculator (https://www.homelight.com/best-time-to-sell-house), but with our 30 years of experience in the Colorado Rocky Mountain real estate market, we use our local knowledge and market experience to eliminate that guess work!
Another factor to consider is online pricing benchmarks. Small pricing adjustments can boost a listing’s visibility on popular home search websites, because buyers will narrow down their search results with filters and benchmarks in $25-$50k increments. So, say you list your home at $503k. Buyers who set their maximum price at $500k will never see your listing in their pool of results, despite your home very much being in their price range. This is simultaneously a little tip for buyers to set your range slightly higher than your max, just to ensure you’re seeing all possible options. You wouldn’t want to miss out on your dream home because it was $1000 more than your max, would you??
Of course, it takes much more than just these few items listed here to determine property value, but we hope that gives you a general sense of some factors to keep in mind when you are seeing staggering home prices. A rough breakdown of the ideology behind this is that it’s part art, part science and part psychology. Long story short, setting the right price on a home ensures that everything else will fall into place that much more smoothly, and working with local, experienced realtors to help you along the way is always the right move.
