Real Estate Blog

How to Price My Home for Sale

10 Jul 2019

Market, by Broosco Team

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What is the fair market value of a property and why it’s important to know what is your home worth before you list it for sale. Why pricing your house fairly is one of the most critical steps of the procedure. Trends of the real estate market in Crete, Greece and how they affect your pricing strategy.

Selling your home is definitely a big decision and there are many things to consider, especially if you are a first time seller. Pricing your house is the one of the first and most critical steps to follow. Of course there's nothing stopping you from changing your price later, but it would be wiser to price your home accurately from the beginning and plan your pricing strategy e.g. start with a competitive pricing, or penetration pricing and change your strategy in the future if needed. So before you set your price, you need to know the fair market value of your property.

What does “Fair Market Value” mean?

Here is a definition given by investopedia:

“Fair market value is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market.” In its simplest sense, fair market value is the price that property would sell for on the open market.

If we skip willing, assuming that both parties are willing for the transaction, knowledge and pressure are very critical factors for the home sale for sellers and buyers as well.

Knowing: Why home value is important to know

Knowing your home’s value allows you to evaluate what you can afford or not. Sometimes sellers think that if they overprice their property, they will succeed to get a higher return on investment (ROI). Overpricing a home often leads it to stay on the market, while demand and interest fade as time passes. On the other hand, pricing it fairly is essential to make buyers “bite” and eventually get a viable offer.

Pressure: Who has the lead on the market?

The real estate market is always fluctuating, sometimes favoring the buyers, sometimes the sellers. Price is all about supply and demand. To the critical answer “How much is my home worth”, a short and maybe cynical answer is easy: A house’s worth is what buyers are willing to pay for it.  For the time being supply is way higher than demand, especially for the residential houses in the suburbs of Chania and nearby settlements. Bear in mind that the competition for a residential vacation house in Chania is not limited in Chania prefecture. Your competitors are also the vacation houses or villas in other areas of Grete or even in other Greek islands, especially if your target group is mainly foreign buyers. To make a long story short, for the time being buyers have the lead.

Does cost affect the fair value?

In the definition of the fair value given above, cost is not mentioned as a factor that affects directly the level of the fair value. Is this normal? Yes it is.  Let me give you an example:

The cost of a 100sqm house built in 2009 was 1.200€ /sqm, so the total cost for the construction company was 120.000€. The profit of the construction company was 20%, equals to 24.000€ and the house was listed for sale for 144.000€. The market was pretty hot by that time and the house was sold fast, which means the cost for the buyer was 1.440€/sqm (I exclude the closing costs to make it more simple). Today : 

  • Scenario A: the market is not that hot and in the area the 10 year old houses are for sale for 1.100sqm, which means that market dictates that the price of the house is 110.000€. What is the difference between 1.440€/sqm and 1.100€/sqm? Part of it is the 10year's depreciation of the house and part of it the Loss because of the market trend.

  • Scenario B: the market is very hot and similar houses are for sale for 1.500€/sqm. What is the difference from the 1.440€/sqm? Profit, which is practically higher if we add the 10year's depreciation.

So does cost affect directly the value of your house?

The short answer is No.

If you want to raise the odds for a sale choose a price that is close to the current fair market value and not according to the cost of your home. Pricing your home above the market value will reduce dramatically the number of prospective buyers that will even see it. 

 

Set your price based on the facts, not rumors…

According to the historical housing price data from the Eurostat, recovery in property prices gains traction as Greek economy improves. For 2019 house prices rising slowly, but please try to read this trend the right way. After 10 years recession and a massive loss that reached even 50% of real estate value, a sliding rise doesn’t mean that it’s time to make more profit from the sale. It means that with the right price now the odds are on your side to avoid a short sale. Do not pay attention to a sale across town with a crazy asking price. I can ensure you that there are dozens of other sales with “crazy low” prices that you never heard about them…  

Homeowners that bought their houses from 2004-2008, when the prices were at the highest level, need to be very careful with their strategy and even compromise with a significant loss from the sale. It’s just like the stock market, you can’t expect to buy a share at a high price and sell it later without a loss. If you are not keen to sell you obviously have the option to wait until real estate market becomes hot, but keep in mind that price levels of 2008 may never come back.

Start with a home value estimate

If you are thinking to sell your home, your first step should be to learn its value in the current market. Make your own effort using online tools or work with a real estate agent to help you list your home at the right price. Once you have agreed on a fair price range and the strategy that you will adopt, then you can prepare your home for the potential buyers. Good Luck!


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