Establishing Value How to Price Your Home to Sell Factors that Affect Value There are a number of different factors that affect value.The comparable sales show what have actually sold recently near your home.These are facts and are given the most weight in determining a price.The number of homes that are currently on the market can also affect value.If the demand is high and the supply is low, the price can go up.If the demand is low and the supply is high, the price can go down.It is just basic economics. Principle of Substitution Substitution refers to the actual value of anamenity. Value is determined not by the cost invested in a property, but by the value derived from it. In the following example, the home with the more expensive well is worth no more because value is in the water, not the cost of obtaining it. Value of Improvements What about the value of my improvements? Regression and Progression  The effect that surrounding home sizes have on the value of a subject property. Regression is the decrease in value when surrounded by smaller homes, progression is the increase when surrounded by larger homes. History of an Overpriced Listing Value trends in the Market Criteria that Determine Value Often value is placed on minor things – condition, amenities or decorating for example.What really determines value?Location and size account for the majority of value…..amenities and size much less. Factors that Don't Affect Value However, there are some things that just don’t affect value at all.For instance, what you paid for the home is irrelevant to today’s market.Just because you might have overpaid for a home doesn’t mean that the new buyer needs to.The market conditions may have changed. You may have invested in certain types of improvements for our own personal enjoyment that has little or no value to the buyer.Sometimes, an owner will make improvements with the highest of quality items that are not justified by the price of the home.They just won’t increase the value. How Buyer's Determine Value When you bought this home, how did you establish value? Comparative Market Analysis Appraisal VS Comparative Market Analysis An appraisal is an estimate of value determined by a licensed appraiser based on comparable sales of similar properties that have sold and closed. A CMA, comparative market analysis, is an estimate of value determined by a licensed real estate agent based on comparable sales of similar properties that have sold and closed.It also includes similar properties that are currently on the market that a buyer would be considering when looking at the subject property. Taking all of the information together, price is determined accordingly. Obstacles to Proper Pricing There are obstacles to proper pricing that need to be avoided if at all possible.There are agents who will accept a listing at any price and then, after you become disappointed that it hasn’t sold, solicit a price reduction.There are neighbors who intentionally mislead other neighbors by letting them think they sold their home for what they were asking for it. Fear of making the mistake of selling too low will also cause a person to pricing a home too high.They know that if it sells for that price it would be good but they just aren’t certain what the “right” price should be. We’ve seen sellers who lose the proper prospective because they are emotionally involved and cannot approach the task logically. No matter how legitimate the need to realize a certain amount from the sale, it will not justify overpricing a home. Overpricing Unfortunately, overpricing actually causes some severe outcomes.It reduces sales associates activity because they know it is too high and they don’t want to show it to buyers looking for a different price home.This leads to reduced marketing response; pretty soon, even the buyers in the market know it is overpriced which leads to actually losing buyers who might have bought it but ended up buying something else. An overpriced home actually attracts the wrong prospects.For instance, a buyer looking in a certain price range expects the home to have certain amenities typical of that price range.When they look at a home that is overpriced, it doesn’t have what they are looking for and therefore, will not consider it.The people who could afford it won’t be looking at it because it is out of their price range.This actually eliminates offers before there is even a chance to negotiate them. If a home is overpriced, it might be used to make a reasonably priced home look like a good value. This means that your overpriced home is actually helping to sell the competition. All of these things extend the time needed to sell a home which could lead to another completely different set of problems. Advantages of Proper Pricing What are they?