When I am doing a sold market analysis (SMA) for an upcoming listing appointment, I look at the sales in the neighborhood for the last 3-6 months depending on the property. I try to find the most similar properties and compare them against the Seller’s house.
I also do an Comparative Market Analysis (CMA) comparing similar properties currently for sale. Why do you ask? Most buyers look at all properties for sale that fit their criteria and price range. So, if the seller’s house is a 3 bedroom 1 bath, 1200 sqft under $150,000, they’ll be looking at all other 3 bedroom 1 bath’s for sale under $150,000. It is highly important for them to see how your property stacks up against similar houses, in the same price range.
The sold properties are what appraisers use. Which in reality this is what the buyers should be using to as long as they have a quality agent working for them. Buyers are comparing your house to the other properties they’ve seen on the market.
When a real estate agent lists a property, their knowledge of the local market and pricing trends should guide them to setting the right price for a specific home. Unfortunately this is not always the case. Some agents take overpriced listings knowing it is neither good business practice or in the best interest of the homeowner.
For example, a seller may have unrealistic beliefs in the market value of their home and demand an extraordinarily asking price. If the agent is unscrupulous, they may take the listing to keep it out of the hands of competitors, knowing that the price will almost certainly have to be lowered after it has sat on the market for a while.
The most crucial period of a home being on the market is within the first two weeks of it being listed on the MLS. If you home is priced to high for what the market will bare you will see it sit as others get sold. Then you will be caught playing catch up to the market and can end of costing you $1,000’s. The extreme downside is if it has been on the market after awhile potential buyers will start to wonder what is wrong with the property and not even bother to view it. This only being because it was being over priced in the beginning.