Determining the right price to offer a home for sale can be difficult for a Brooklyn homeowner. Yet, even in this unprecedented real estate market we have been experiencing, setting the right sales price is extremely important.

The seller determines the sales price, but the buyer determines the value by what they are willing to pay for a home.

A fallacy that I often hear from Brooklyn homeowners is that they can ask for a higher price and negotiate down if need be. on the contrary, this philosophy may very well backfire. 

As a result of overpricing, the number of buyers who look at the home may drastically reduce. A buyer sets out on their home search with a price range determined by the lender. If your home is priced correctly and in their price range, they will take a look. If your home is priced outside their price range, they are less likely to look. 

Buyers looking in the price range of your overpriced home won’t be interested because other homes listed at the same price offer them much more.

Buyers know that homes are selling quickly in our current market, and negotiating a lower price isn’t likely. Therefore, they will probably eliminate your home because it doesn’t fall into their price range.

An overpriced home will take longer to sell. Statistically, overpriced homes end up selling for less than the amount the house would sell for if it was appropriately priced.

How does a real estate agent evaluate a fair asking price for a home? They use what is known as a comparative market analysis (CMA). Looking at comparable homes that have sold in your neighborhood is the beginning step of creating a CMA.

What makes a home comparable?

1. A similar number of bedrooms.
2. A similar number of bathrooms.
3. Square footage within 200 sq. ft of your home.
4. Within a ¼ mile radius of your home.
5. Same zip code.
6. Same school district.
7. Sold within the past six months.

It may not always be possible to find homes that are an exact match to yours. Using comparables that are most like yours and as close to the parameters as possible is key to determining the best price.

Real estate agents also want to look at other types of comparables in addition to the sold comps.

1. Homes currently for sale – these homes are your current competition.
2. Houses under contract – these homes show what interests buyers.
3. Homes that did not sell – homes for sale that expired also give clues to buyers’ willingness to pay for a home.

Let’s take a look at how a real estate agent creates a comparative market analysis.

1. A real estate agent will gather information about your Brooklyn home. 
   1. Location of your home
   2. Number of bedrooms
   3. Number of bathrooms
   4. Square footage
   5. Age of your home
   6. Lot size
   7. Updates
   8. Special features 
   9. Tax information
2. The agent will look to see the sales history of your home, if available.
3. Comparable property information is researched.
   1. Homes that sold
   2. Houses currently for sale
   3. Homes under contract
4. Now it is time to analyze this information.
   1. Days on the market
   2. Listing price to sales price ratio
   3. High, low, and average sales price
   4. Condition of the subject property
   5. Location of the subject property
   6. Neighborhood amenities
   7. Current competition (home currently for sale)
5. Your agent will create a report showing the Brooklyn homeowner the facts found in the agent’s research for the purpose of determining a suggested price range.

Your real estate professional will present and review this information with you. The next step is for the Brooklyn homeowner to set the price. 

A comparative market analysis is not the same as an appraisal. A comparative market analysis is a real estate professional’s process for establishing a price range to offer a home for sale. An experienced real estate agent tries to follow the guidelines that an appraiser must follow when determining a home’s value.

An appraisal occurs after the buyer and seller have agreed on a sales price. An appraiser is a state-licensed professional. The buyer’s bank will verify that the buyer’s price is equal to or less than the home’s value. Although the mortgage lender orders an appraisal to be done, the appraiser is a neutral party in the process. The appraisal will prevent the bank from lending more money than the home is worth to protect their investment. This article will provide you with some additional information about appraisals.

Three main factors will affect the saleability of your home. 

1. Condition
2. Location
3. Price

The condition of your home is something you may or may not be able to improve. If your home is outdated or in need of repairs, a buyer will not want to pay top dollar for the home. Therefore, it is best to make whatever updates or repairs you can before placing your home on the market. 

The location of your home is not something that will change. Moving your home to sell it is not a practical tactic to take. Neighborhoods change over time. Whether your area is desirable or in a downturn is not within your control.

The price of your home is a factor that you can control. It is natural to want to get the most money for your home. Understanding the details of the homes sold in your neighborhood is an essential factor when determining a sales price. Did your neighbor sell at a higher price? You need to look at the facts. Did they have a larger home and more updates?

Read this blog post to understand the reasons a home may not be selling. 

What are the dangers of overpricing a home? 

1. Your home will sit on the market too long. 

The most activity a home will see is in the first few weeks of hitting the market. After 3 or 4 weeks, the interest will wane. In the current real estate sales environment, buyers tend to think something is wrong with a home if it has been on the market for a while. 

2. Your sales price may be lower than if you priced it correctly.

As I said before, an overpriced home will generally sell for less than what it would have sold for if you start with the correct price.

3. If you do sell, your home may not appraise.

Maybe you were lucky enough to find a buyer willing to pay your high asking price. If the appraisal comes in lower than your contract price, the lender will not loan the money to your buyer. Depending on the type of loan the buyer was obtaining, that appraisal may be valid for some time and affect future buyers.

4. You won’t reach the right buyers.

Buyers and their agents are looking at homes priced within their price range. They may not even realize that your home is available for sale because it is not showing up in their searches. 

5. You give leverage to other homes for sale in your neighborhood.

If your house is overpriced and your neighbors price their home correctly, you make your neighbors home look like a better deal. Price will draw buyers to the home that seems to be a better value. 

Many factors will affect the sale of your home.

Working with a real estate professional can help you avoid some of the pitfalls. An experienced real estate agent studies the local real estate market and has its finger on current trends’ pulse. By all means, work with a local professional to determine the best price for your home.

It is tempting for Brooklyn homeowners to overprice their homes in a seller’s market to see what happens. But, hopefully, you understand now why this strategy isn’t going to be to your advantage.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate. As a Brooklyn real estate agent with over 30 years of experience, I know the local market and understand the best home pricing strategies. I can be reached by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

Finally, you are experiencing Brooklyn Homeownership. You found the perfect home and have settled in comfortably. You may have been surprised by the expenses you had incurred in the buying process. Closing costs, down payment, and moving costs added up to more than you expected.

There is more to the cost of Brooklyn homeownership than those initial costs incurred. Let’s take a look at some of the hidden costs of owning a home.

1. Home maintenance and repair.

Home maintenance and repair may be a significant expense of Brooklyn homeownership, depending on the age and condition of the home you purchased. Some items that fall into this category are:

• Lawn maintenance
• Cleaning
• Gutter maintenance
• Pest prevention
• Weatherproofing
• Exterior maintenance
• Roof maintenance
• HVAC maintenance
• Plumbing maintenance
• Emergency repairs

2. Home Owners Insurance

Home owner’s insurance is an expense you would expect to have during homeownership. Your mortgage lender most likely will require you escrow for your insurance payments. You must understand what your policy will cover, and your deductible amounts should you need to utilize the policy. 

It is also essential to determine if you would need any additional insurance. You may want to consider a personal property rider or a sewer and water line rider. Consult with your insurance agent to determine if you have all the coverage you need.

Review your policy periodically throughout your homeownership to keep it up to date.

3. Property Taxes

When you purchased your home, you were aware of the fact you would be paying property taxes. What you may not be prepared for is an increase in property taxes. If the tax rate increases or your property assessment were to change, the amount of property tax you would owe would increase.

4. Utility Expenses

Total utility expenses can often be surprising to new homeowners. If you were renting before your Brooklyn homeownership, you might not have paid for all your utilities yourself, and the expense may not be what you expected.

Costs can vary from season to season depending on the weather.

I recommend asking the homeowner about their utility expenses when you are considering your home purchase. Although your number of household members may be different, which would affect utility usage, you will have a good basis to budget your monthly expenses.

5. HOA Fees

If you live in a community with a homeowner’s association, you most likely will be paying a monthly, quarterly, or annual fee to the association. These fees vary from community to community based on what they will cover. 

You should investigate what is covered by your association before purchasing a home. I have seen homeowners assume something is covered only to discover when a repair is necessary that it is not and is the owner’s responsibility.

6. Furnishings

If you have more space in your new home, you most likely will want to furnish it. Purchasing new furnishings is where you can break your budget. You may consider waiting until you have made your first mortgage payment before buying anything new.

Create a plan and a budget. Make a list of the furnishing you need and a priority. Then you can estimate the cost for each. Try to avoid the urge to splurge when first moving into your home. After living in the space for a while, you may decide you need different items for the functionality of the rooms.

7. Commuting

Your new home may be further from your old home. Whether you are driving or taking public transportation, you may experience an increased cost in getting to work. If you didn’t own a vehicle and now find you need one to get around or need a second car for your spouse, you will be facing additional expenses.

Now that you know some of the hidden costs of Brooklyn homeownership, you need to create a budget. It is vital to develop a realistic spending plan, so you know you have enough money to cover the things you need along with the things that are important to you.

Start by calculating the costs of owning your home. Things to include are:

• Monthly mortgage payment
• Taxes and insurance if not included in your mortgage payment
• Monthly utility costs
• Maintenance and repairs
• Updating and furnishing
• Homeowner’s Association Fees
• Emergency fund

It is important to save for an emergency fund should something unexpectedly need to be repaired or replaced in the home.

You will then need to include your other monthly expenses such as car payments, commuting expenses, groceries, student loan payments, entertainment, child care, and any additional recurring monthly payments.

After totaling your monthly expenses, compare that to your total monthly income. If your income is higher, you can plan to add to your savings for retirement or your dream vacation. If you need to shave your budget to save money, take a hard look at what adjustments you can make. 

Now that you have a budget set, you need to use it. Tracking your expenses is essential. You can avoid overspending by recording what you have spent each week. By logging your expenditures, you can identify any unnecessary spending in any category. 

Periodically review and adjust your budget as necessary. Consider reviewing your budget every quarter.

Now that you have a handle on the expenses of Brooklyn homeownership, you may want to start looking for ways to save money.

You can save money on home maintenance by:

1. Doing it yourself. 

Not all home maintenance issues require a professional. Lawn care, cleaning, painting, and other regular maintenance issues may be items you can do yourself. There are many available resources to help you learn these routine tasks. Knowing your abilities will determine what you choose to do around the home yourself.

2. Hire quality professionals

When you need something repaired that is beyond your skillset, the lowest-priced professional may not be your best bet. Do your research to know if the professional you are hiring is licensed and insured with a good reputation. You may get some good recommendations from friends and neighbors.

3. Don’t defer maintenance

There are regular maintenance items that need attention throughout your home. This helpful New York Times article breaks down home maintenance by season. Deferring home maintenance can cost you more money in repairs down the line.  For example, a running toilet can double or triple your water costs.

4. Check the insulation of your home

A well-insulated home can save energy costs. If you need to invest in better insulation, doing it early in your homeownership will save you money for years to come.

5. Install a programable thermostat

You can save money on heating and cooling expenses by installing a programable thermostat. You can adjust the temperature for the times you are sleeping or away from home. The thermostat can be programmed to readjust the temperature before waking up or arriving home to your comfort level.

6. Obtain a home warranty

When you purchase a home, the seller may be offering a home warranty. If they are not offering one upfront, you can negotiate with the seller to provide one or purchase one yourself. Be sure to discuss this with your real estate agent before closing. A home warranty can save you thousands of dollars in repair costs.

The home warranty will cover major components of the home and other repairs. They work as an insurance policy. You will be required to pay a service fee (deductible). If you have owned your home for a while, you may still be able to purchase a home warranty policy. Check the coverage carefully because it may vary from company to company.

Understanding the hidden costs of homeownership and budgeting for them is vital to anyone considering Brooklyn homeownership. If you are just starting your home search, check out my previous blog post to learn what to consider when you think you have found the perfect home.

Owning a home of your own is one of the best investments you can make. Proper planning will prevent you from becoming overwhelmed.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate. As a Brooklyn real estate agent with over 30 years of experience, I understand homeownership costs and can help you prepare for them. I can be reached by phone at (718) 253-9500 ext. 1901 or by email at [email protected].