We often hear about the macro factors one should consider in pricing an apartment: unemployment figures, interest rates, buy/rent scenarios … yet sellers often neglect one of the most important factors in determining the asking price of their home: the competition.
What do we mean? If you or your agent can’t answer the following questions, you have some homework to do:
- How does your apartment compare, in terms of condition and price to those apartments that closed within the last few months in your building? (When we write “condition”, we mean more than the renovations, but also factors such as light, views, the floors, etc.) Comparable asking prices are one thing, but how do you know how legitimate they are? Closed sales information is key and the only true data-point on which to hang your hat.
- How many apartments are up for sale in your building right now, and how long have they been on the market at their respective asking prices? This is important: considering their asking prices, how will your apartment compare and compete? Further, are you willing for your apartment to be on the market as long as the others have considering that very asking price? Just because you have apartments for sale in your building, doesn’t necessarily mean they’re properly priced.
- How many other like apartments are on the market right now within a ½ mile radius to you, and how do they compare to yours in terms of condition and price? Make sure to look carefully at closed sales data within this radius as well. Ask yourself: “where else would someone who would live here also look to purchase in terms of buildings and/or neighborhoods?” “What kind of features may be unique to my property that would be important to a potential buyer?” Try to think back to when you purchased the property, particularly if it wasn’t so long ago, and the other properties you considered before landing on yours.
Knowing the answers to these questions is also important as, shortly after you accept an offer for your home, a third-party appraiser will come in and use these very same factors to determine the value basis upon which a bank can provide a mortgage to the buyer. (Read here what happens when the appraisal comes in below the contract signed price.) To the extent you believe that the market prices your home and not you (as we do), knowing as much as you can about the market and what it’s telling you will be key in successfully selling your property.
