Considering the extensive news coverage of housing market woes, it might be easy for homeowners to wonder exactly where their neighborhood stands. This confusion can have serious consequences as homeowners base their “housing” decisions (i.e. when to put your home on the market and at what price) on their perception of the local real estate market. And if perceptions can get distorted from media coverage hungry for drastic news, it is possible that the decisions made on them might not be in the Seller’s best interest. The National Association of Realtors has made a cliche out of the “real estate is local” conundrum. But be that as it may, the fact remains that what affects the sale of your home are local conditions down to the neighborhood level. (If you think about it, what does it matter to a Houston seller that home prices in California are plummeting when homes in his inner loop neighborhood are selling like hotcakes). In this buyer’s market, overpricing your property is the biggest mistake a seller can make. There is no marketing strategy that can make up for an overpriced home in this market. But don’t misunderstand my objection to home overpricing with the idea that the seller has to dramatically cut their price to “give away” levels. In my opinion the winning combination is properly priced homes combined with aggressive marketing campaigns.

But how does one go about properly pricing a home?

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In my view, there are a few factors to consider. First, your real estate agent has to provide you with a conservative comparative market analysis (CMA). Look at comparable sales in the last 3 months (at most 6 months). In better markets, agents will go as far as one year in researching comparable sales, but as we very well know by now, the market was significantly different last year. Recent sales are the most accurate indication of proper value and your best antidote for overpricing. Once a value is determined, make sure that it is checked against the current inventory for sale (active listings) to see how it would fare. You don’t want to be the most expensive listing on the market or the least expensive. The best place to be is somewhere in the middle. Second, you have to take into consideration the foreclosure inventory in your neighborhood as excessive foreclosure listings may attract away buyers fascinated with getting a bargain. If foreclosure listings make up a substantial percentage of homes for sale in the area you must take that into consideration and make an appropriate adjustment (downward). Third, home sellers and their agents have to pay close attention to overall trends in their neighborhood. If it appears like the neighborhood is a fast selling, desirable place to be Sellers can demand a  (careful) premium for their home (or vice versa). This ties into how we started this article:

“…the fact remains that what affects the sale of your home are local conditions down to the neighborhood level.”

But how does one know what the neighborhood trends are? Consulting a knowledgeable Realtor is definitely the way to start. Helping buyers and sellers in a particular neighborhood puts Realtors in a unique perspective to see overall trends and gives them the ability to assess the local (neighborhood) market. In addition, the Houston Chronicle has a great tool in their Homefront section that allows visitors to see neighborhood price ranges, price trends and year on year changes. They also have a zipcode map for how the area fared in 2007.

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