How much is your house worth?

Thinking about selling your home?  The single most important step in the process is  determining the value of that property.  As much as I'd love to take this opportunity to convince you that one agency is better equipped than another to sell your home (I'll save that for another time) the decision about price, not agency is the question which should be paramount in your mind.

A home that is "listed" too high may waste precious time sitting on the market for longer than it should.  Waiting for that mythical uninformed buyer to show up who doesn't have a good sense of the market is usually an exercise in folly.  Even if a buyer does appear who is willing to pay an unrealistic price, the fact is that unless that buyer is ready to pay with cash, the house is going to have to "appraise" (value set by a certified appraiser) at a level that is at least as high as what is going to be financed.  If the house doesn't appraise, the financing and thus the deal, are both destined  to fall apart.... end of story, with your house still sitting there with a sign in the yard.

The harsh reality is that when a house hasn't sold in a timely manner the reason is almost always because it is over priced. 

Seller's never want to be told that their house is over priced but Realtors® are duty bound to abide by a Code of Ethics by not misleading their clients, regardless of how badly the truth might sting (either party)...
(Code of Ethics and Standards and Practices / National Association of Realtors® Standard of Practice 1-3: "Realtors®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.")

"Buying a listing" or convincing a seller to price their property at a level that is much higher than true market value in order to please the client and secure a listing is a practice that is highly frowned upon.  Ironically, what usually happens is that the price eventually does get lowered, but only after more precious time and money have been wasted.

The point is, overpricing a property usually does little good in the long run.

On the other hand, what could be worse than to price your home too low?  Other than the likelihood that it will probably sell in record time, there's nothing good about losing money that you shouldn't have by under pricing your property.  Having done so, you have not only hurt yourself, but the market as a whole.  Future sales and pricing of comparable properties in your neighborhood are now burdened with weight of your under-sale as well.  Here's why:

The best way to determine the current value of your property is to ask a local Real Estate professional to perform a Comparative Market Analysis.  A local Real Estate Broker lives and breathes in the market in which he/she operates and in addition has immediate access to the sales history of every combination of property, finish level, neighborhood location and every variation in-between. 

The Comparative Market Analysis (CMA) prepared by your broker will compare active listings, recent and pending sales, days on market, price adjustments etc. of "like" or comparable properties first in your immediate neighborhood, then in the surrounding similar neighborhoods within the region.  Selecting comparable properties or "Comps" is a bit tricky but will ideally include a cross section that can be ranked in groupings which are "Similar," "Clearly Superior" and finally "Clearly Inferior" to help the seller see exactly what they're up against with regard to price relative to value in their immediate market.  

Although a CMA can not be used as a formal appraisal, it is often the case that a local Real Estate Broker can draw a more accurate picture of the value of the properties in his or her sphere of influence than the estimate of an inexperienced or out-of-town appraiser.  CMAs are given by brokers in pursuit of a listing free of charge and take far less time than a formal appraisal as well.  It's important to stress however that a CMA is an informal instrument meant to be used as a guide, never as a substitute for an appraisal.

It is you that ultimately decides at what level your property should be priced; after all, it's your house.  A properly prepared CMA by a local Broker familiar with your town and neighborhood should prove to be a useful tool to help you make an informed decision, and not a mistake that may cost you money.
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Fred Jaeger is a Principal Real Estate Broker licensed in The State of Oregon and is an e-PRO and CDPE designated REALTOR associated with High Lakes Realty & Property Management.  He can be reached at 541 598 5449 or fred@fredjaeger.com .

Fred's Top 10 Real Estate Tips

Hire a local Real Estate Professional.  You'll be glad you did in the end.  Your local Real Estate professional is your advocate in every regard whose job is to provide you with all possible information and/or services that will be of benefit throughout the transaction.  A lot of footwork is needed during any Real Estate deal, and you will need and appreciate the resources that can be made available to you via your local Broker.  These days, especially if you're selling, you need a REALTOR® now more than ever.

Shop for loan rates and Pre-Qualify for financing before you start to look at houses.  If you're not sure where to begin, ask your local Real Estate Professional for recommendations.  Having a letter in hand from a lender saying you're qualified and ready to proceed can be a tremendous tool that will strengthen your offer when your ready to buy.  It will also take away an enormous amount of stress that you don't need in the first place. 

Be careful with the financing.  Interest-Only, variable (ARM,) or other non-traditional loans often have enticing rates to begin with that might make a home normally out of your reach seem affordable.  As has been all over the news lately, these types of loans can be trouble if taken out for the wrong reasons.  Generally speaking, if you intend to remain in a home more than just a few years, a fixed rate, long term loan is preferable.  Conversely, if you intend to be selling within a couple years anyway,  (and hopefully at a profit) it doesn't make sense to spend more cash than is necessary every month on a fixed rate loan (generally.. however, rates are crazy low right now, even on fixed 30s.)  Talk in depth with your lender about exactly what your plans are over the term of your loan.  Know the details of any loan you're getting and the reasons why.

Long term loans shorter than 30 years will pay off your home much faster, but be careful. Instead of locking yourself down into a 15 year loan (for example) in lieu of the traditional 30, get a thirty year loan and double up your payment, or at least make a practice of paying extra money each month toward the loan "principle."   (Do the math.. it's amazing.)   By using the extra-to-principle method, you will always have the optional safety valve, during hard-times, of simply paying the actual amount due on the your loan (and not the accelerated amount) when or if cash ever becomes hard to come by.  If you lock yourself down to say, a fifteen-year loan, that monthly amount due is set.

Don't buy more house than you can afford.  Most of the time, with good credit, the majority of buyers can be approved for more loan, and consequently more house, than they can really afford.  Don't let anyone push you past your financial limits.  The combination of excitement, loan approval, outside pressure and sheer good old-fashioned impulse, is often a classic formula for financial disaster.

Don't buy less house than you can afford, or worse nothing at all.  I know that sounds like a contradiction of the above but it doesn't make sense to buy less house than you can afford or no real estate at all.  Keeping in mind what I said about not buying too much house, try to reach just a little.  As long as you can afford it, in the long term, as with all investments, generally the more you invest, the greater will be your corresponding return.

Buy what feels right.  Don't get talked into buying a house that feels wrong for any reason.  If it's a significant-other doing the pressing, sit down and have an honest talk about your feelings.  Even if you can't quite put your finger on why you feel ambivalent, unless you're 100% certain about a potential purchase, don't do it.

Do your homework.  In most cases, a home inspection for structural, electrical, and plumbing issues is good advice before closing, but that's not all you should check out.  What about Insects and Dry Rot?  Asbestos, Lead Paint etc?  These things are not part of a normal inspection, so don't just assume that they are. What about the lot lines?  Are you certain that the fence you had been looking at is a good indicator of the property line?  Does the property have Home Owner's Association dues?  Has the escrow company given you a clean title report?  Have you checked the local neighborhood Covenants (CC and R's?)  Perhaps your beloved horse or other pet simply isn't allowed in the neighborhood.  Check out all of these things well in advance.

When selling, get a Comparative Market Analysis (CMA) from a local Real Estate professional who knows the neighborhood in order to get your house priced properly from the very start.  Over or under pricing your home can cost you time and/or money that you don't want to lose.

Try to have fun.  Think positively.  Buying or selling Real Estate can be among the most stressful exercises in life.  Most of the time, however, given the right circumstances, it can also be a lot of fun.  Let your Real Estate Professional carry as much of the burden as possible (not you) and try to remember that when and if things go a little sideways, that it is that very awkward moment (or more) that will make the happy times to come all the more satisfying.  Almost every Real Estate deal, is in the end, a sweet and unparalleled happy Champagne-popping experience.
Once it's over that is!  See you next time!
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Fred Jaeger is a Principal Real Estate Broker licensed in The State of Oregon and is an e-PRO and CDPE designated REALTOR associated with High Lakes Realty & Property Management.  He can be reached at 541 598 5449 or fred@fredjaeger.com .