You are getting ready to list your home for sale. You can make all the necessary repairs to your home, clean it, stage it, maybe even remodel it, yet there are some factors that may impact the eventual sales price of your home that are outside of your control. Regardless of how well you’ve maintained your home and despite its perfect location, one or more of the following circumstance may rear its head and dash those dreams of riches at the closing table.
Let’s take a look at three factors that may impact your home’s value.
Condition of the current real estate market
You’ve heard real estate markets referred to as buyers’, sellers’, or less common, as a balanced market. You are in the thick of a buyers’ market when there are lots of homes for sale and fewer buyers competing for them. We saw this last for example from about 2007-2012. There was as much as 12-18 months of housing supply. Since we know that the buyer is in the driver’s seat, prices tend to stagnate or more commonly they fall in this type of market. On the contrary, when the inventory of available homes for sale is tight and there are many more buyers seeking homes than available properties, we are in a sellers’ market and home prices rise. This is something we’ve seen now since about 2014. Right now for example in our market, there is something less than 3 months supply of available house inventory!
So what creates these different market conditions? Many factors affect both the national and local housing markets. The biggest factor among them is the strength of the economy. Both nationally and locally. When the economy is good, consumers have money to buy homes and home prices typically increase. In tough times, when unemployment levels are high and incomes stagnant as compared to the cost of living, the real estate market will feel the pinch as it’s on the front lines and sees changes in the economy first!
Another major factor are interest rates. When rates rise, many are priced out of the housing market or their budget of what they thought they could afford is significantly reduced. When mortgage rates fall, folks clamor to buy homes. Therefore, the overall strength of the economy will dictate the eventual sale price of your home.
“Things do keep a changing”..even in your Neighborhood
Ever sit back and think about how different your neighborhood and the surrounding area has changed over the past five years or so? How about the past decade? It’s amazing how a once rural feel of a neighborhood almost seems down right ‘metropolitan’ after 5-10 years goes by and that once quiet country road you used to live in now seems like a busy highway! Your neighborhood, and the surrounding area, may look nothing like it did when you bought the home. Even doing the most careful research before committing to purchase a home can’t foresee future zoning changes, the neighbor that builds an extra story on his home and blocks your view or school zoning changes. These are just a couple of examples of events that can negatively impact your home’s value.
Let’s just suppose a change in zoning allowed a dump or landfill to be placed near your neighborhood. Nearby home values would drop by almost 7.5% according to Business Insider’s Mandi Woodruff.
A power plant will ding your value from 4-7%. A sex offender as a neighbor will drag down your home’s value by up to 12%. If a neighbor forecloses the national average loss of value of nearby homes is over $7,000!
Now, some neighborhood changes might be applauded, at least by nearby homeowners. Ever hear of “The Walmart Effect?” The name typically describes the economic impact on local businesses when a box store or national chain, such as Walmart, moves into the area. This has been found to apply to home values as well.
So, if a Walmart comes to your area, rejoice – your home might have just gotten a 3% increase in value! This according to a study by the University of Chicago and Brigham Young University.
Whether you are a coffee connoisseur or not, cheer loudly when you learn that a Starbucks is coming to town and hope that it’s within a short distance of your home. Zillow found that between 1997 and 2014, the average increase in home value nationwide was 65%. Homes within a short distance of a Starbucks, however, saw a hefty 96% increase. These homes had almost a third more appreciation due to a Starbucks being nearby! Do you love shopping at Trader Joe’s and Whole Foods? Add one of these nearby to the list of “please-come-to-my-neighborhood” businesses. If they do, your home may see an increase in value of close to 20%!
The real estate agent you choose
While pricing a home to put on the market isn’t rocket science, it’s also not something typically that the inexperienced agent is able to do and meet with much success. It takes years to learn how to properly research the real estate market, to learn how to find the best comparable homes to yours and all of the various other factors that go into determining your home’s current market value. If your listing agent comes up with the wrong price, your bottom line will be impacted.
Overpriced homes are notorious for sitting longer, racking up more days on the market, and eventually selling for far less than expected. Buyers’ agents know how much homes in a particular area are worth and more than that, most savvy home buyers today have a pretty good idea too. They may want to see a home they think is overpriced to gauge more about it in person, but they won’t make an offer if they feel it’s 3-5% (or more) too high. So, the overpriced listing will sit on the market. The listing becomes stale and agents and buyers think there must be something wrong with the home.
Underpricing a home is also a big gamble. Sure, your agent may tell you that this “strategy” will create a bidding war, but what if it doesn’t? Are you willing to take less than market value for your home? I wouldn’t be.
After pricing a home, the number one job that listing agent has is to market the home to find the buyer that will pay the most amount of money the market will bear for that property. Marketing not only requires a special level of know-how, but money as well. How well-positioned, from the point of view of marketing expertise, is your agent? Is their brokerage? Ensure that the agent you hire has not only a robust marketing plan, and isn’t afraid to spend what it takes to get your home sold, but also that they are backed by a large national brokerage network that gives them the tools needed to market your home to be able to reach as big a “pool” of buyers as possible!
Remember, you’ll pay the same listing fees for the services of an agent who gives you bare bones service as you will for the professional today – so choose wisely.