The 4 Biggest Impacts on Listing Price
If we could provide a simple equation that answered the age-old question of how to price your home, our role as realtors and guides would be a lot simpler. As it is, there are dozens of factors that can go into the valuation of a home, and not all of them are entirely under anyone’s control. The difficulty is that there are a few factors that can have a much more profound impact on value. Learn the top 4 aspects that will alter your asking price when selling your home – and what, if anything, you can do to enhance or mitigate the impact.
1. The Market
The saying is true: something is only as valuable as what someone else is willing to pay. If an individual buyer is particularly motivated and has the financial resources available, they may be willing to pay above the asking price to secure the purchase. The market – loosely defined as the total number of individual buyers and their financial situation – will have the biggest impact on your home’s value. Simply put, the number of buyers there are and how much they’re willing to spend have is key. What drives that is often the local, regional, and national economic conditions.
While you cannot control economic conditions, you may be able to control when you list your home. You have likely heard a lot about the current conditions of the real estate market. With more inventory than there are buyers, now might be the time to discuss your options to get the most equity out of your home with your real estate agent.
2. The Bank or Lender
While buyers may impact the value of your house, there is another party that often has an equally big impact on selling price: the lender. When a seller and buyer enter into a contract, the buyer’s mortgage company will require an appraiser to visit the property and determine its value. If the appraiser’s number does not reach your purchase price, either the buyer can cover the rest with cash or they may renegotiate the purchase amount. Oftentimes, the buyer does not want to pay above the appraised value of the home – unless they are particularly motivated and able.
Just like buyers, lenders are often at mercy to current economic conditions. If there is a market downturn, many lenders may limit who can get a mortgage and at what percentage rate, which can have an impact on what buyers can afford. Higher interest rates mean less room in the budget for the premium. While your ability to influence this situation is limited, there are a few things you can do. One would be to hire your own appraiser prior to listing in order to get an idea of what your home may be worth. This way, there are no surprises during the selling process. Another way you can mitigate this situation is to focus any home renovation funds on the areas of the home that will offer the biggest return. Reach out to a Malfer & Associates agent today for suggestions on what will offer the biggest return and to take advantage of the Compass Concierge program that can front the costs for many updates.
3. The Land and Location
If there is one single factor that can impact the price of anything at all, it is scarcity. How much of that “thing” is available? Land is one resource that we can never make more of. Depending on where your yard sits and how big it is, you may be sitting on a lot of cash.
You can always build a new structure if you have the existing land so over time, the building itself will lose value. On the opposite end, land appreciates in value, as you cannot create new earth. Where your particular piece of earth sits, or its location, is a significant determining factor in value.
If your home is in an area with a desired school district, on a cul-de-sac, situated next to a lake, or in an area with limited building capabilities, your land will be in demand, regardless of how many power lines are nearby or how busy the street is. Conversely, if you live in a less desirable location, home renovations may not alter value as much as the land it is sitting on.One way to determine your land’s value is by looking at land for sale near you and comparing that to an area you know to be less desirable. While you can’t move your home to another plot of land, you can do a few renovations to help improve your property’s value. One example is if you own several acres of land that is filled with trees, clearing the trees may offer a significant jump in value for certain types of buyers, such as developers. Another contribution to value may be zoning. If your home is dual zoned for commercial or residential use, you may see an increase in property value.
4. The Home
While it’s the least impactful out of the top four in this list of factors, your home itself is still a significant factor in the listing price. Particularly, the home size and usable space will be most impactful. The value of a home is typically determined in price per square foot, but square footage is often determined by what is defined as “usable space.” For example, if you have a 3,000 square foot home and 600 square feet of that is the garage, then your price per square foot will only include the remaining 2,400 square feet. The usable space buyers are most interested in is the number of bedrooms and bathrooms.
The age and condition of your home are other major pricing factors. If you upgrade to brand new granite countertops in your 80-year old home, but the roof is leaking and the air conditioning unit is 10 years old, the overall condition of the house is not improved enough by the countertop to increase the price. It’s important to plan renovations that will increase the condition of your home, leading to an increase in your house’s value.
Out of all the valuation factors included in this list, this is one aspect you have complete control over. Instead of doing a lot of little things to get the house ready for sale, consider doing a few big things like updating the plumbing or fixing the water-damaged ceiling, if necessary. Just about anything broken will come up during inspection, and depending on the severity of the issue, buyers often either ask for you to fix it or back out of the contract entirely. This is another area that our Compass Concierge program can help front the costs for.The best thing you can do to ensure you get the highest price when selling your home is to work together with an experienced real estate agent. At Malfer and Associates, our over 350 years of combined experience in the Kansas City area has helped us hone our home selling approach, deeply understand the market trends, and ensured our sellers get the personal service they deserve. If you are considering selling your home, consider reaching out to Malfer and Associates today!