How to Set a List Price for Your Home
Setting the list price for your home involves evaluating various market conditions and financial factors. During this phase of the home selling process, as your REALTOR® I will help you set your list price based on:
- Pricing of Comparable Active Listings
- Up To The Minute Market Conditions
- Offering Incentives
- Estimated Net Proceeds
You have to analyze what buyers are seeing when they shop for a home in your price range. While appraisers tend to consider this factor only on more upscale properties, knowing what your competition is doing to attract the same buyer you want is critical.
comparable sold properties
The comparisons are relatively simple when looking at tract homes. Often you can find how much the exact same floor plan sold for. In more rural areas each property is unique. Entire neighborhoods will consist of custom designed homes. Gated enclaves will share common facilities but individual property values can vary greatly.
Reviewing current market conditions can help you align your pricing to fit your time and urgency requirements. Current rate of sales in your price range, average days on market and sold prices compared to asking prices are all important factors to consider.
Creative incentives in our current market include options for sellers to "Buy Down" the interest rate. As an example; If the prevailing rate is 6.25% for a fee sellers can offer potential buyers a 4.25% rate for the first year. It is not uncommon for sellers to pay some of the buyers closing costs on less expensive properties where where the ability of the buyer to afford the closing costs is a factor.
Analyzing costs of incentives, if any, that make sense to you can guide you in your deciding how to price your home. It is important to remember that "what you owe" or "what you want to make", have NOTHING to do with pricing your home correctly. The buyers set the price by what they are willing to pay.
Pricing Considerations – Find a Balance Between Too High and Too Low
When setting a list price for your home, you should be aware of a buyer’s frame of mind. Consider the following pricing factors:
If you set the price too high, your house won’t be picked for viewing, even though it may be much nicer than other homes on the street. But compared to other houses for sale, your home simply looks too expensive to be considered.
If you price too low, you'll short-change yourself. Your house will sell promptly, yes, but you may make less on the sale than if you had set a higher price and waited for a buyer who was willing to pay it.
Price Against Comparable Sales in Your Neighborhood
No matter how attractive and polished your house, buyers will be comparing its price with everything else on the market.
Your best guide is a record of what the buying public has been willing to pay in the past few months for property in your neighborhood. As your REALTOR® I can furnish data on sales figures for those comparable sales and analyze them to help you come up with a suggested listing price. The ultimate decision about how much to ask, though, is always yours.
Competitive Market Analysis (CMA): The list of comparable sales a REALTOR® brings to you, along with data about other houses in your neighborhood that are presently on the market, is used for a "Comparative Market Analysis" (CMA). To help in estimating a possible sales price for your house, the analysis will also include data on nearby houses that failed to sell in the past few months, along with their list prices.
A CMA differs from a formal appraisal in several ways. One major difference is that an appraisal will be based only on past sales. Also, an appraisal is done for a fee while the CMA is provided by your REALTOR® and may include properties currently listed for sale and those currently pending sale. For the average home sale, a CMA probably gives enough information to help you set a proper price.
Formal Written Appraisal:
A formal written appraisal (which may cost a few hundred dollars) can be useful if you have unique property, if there hasn't been much activity in your area recently, if co-owners disagree about price or if there is any other circumstance that makes it difficult to put a value on your home.
TIP: If you do order a market value appraisal, make it clear you don't need an elaborate, or full narrative report, i.e., the kind that's complete with photos of the house and neighborhood. Floor plans and a site map is sufficient in most cases.
Market Conditions – Is it a Buyer’s Market or a Seller’s Market?
A CMA often includes a Days on the Market (DOM) value for each comparable house sold. When real estate is booming and prices are rising, houses may sell in a few days. Conversely, when the market slows down, average DOM can run into many months.
Your REALTOR® can tell you whether your area is currently in a buyer's market or a seller's market. In a seller's market, you can price a bit beyond what you really expect, just to see what the reaction will be. In a buyer's market, if you really need to sell promptly, offer an attractive bargain price.
If You Price High, Set a Schedule for Lowering the Price
Some sellers list at the rock-bottom price they'd really take, because they hate bargaining. Others add on thousands to the estimated market value "just to see what happens." If you want to try that, and if you have the luxury of enough time to feel out the market, sit down with your REALTOR® and work out an advance schedule for lowering the price if need be.
If there haven't been many prospects viewing your home after three weeks, you may need to lower your list price. Plan on doing that regularly until you find a level that attracts buyers. Make a written schedule in advance, before emotion takes over and you're tempted to dig your heels in.
Offering Incentives to Hasten a Sale
Sometimes cash incentives are as effective as lowering the price, especially in the lower price range where buyers may be "cash poor." You may offer to pay some or all of a buyer's closing costs and discount points required by the buyer's lending institution.
If you haven't had much traffic through your house and you’re in a hurry to sell, you may want to add the offer of a bonus to the selling broker, in addition to their commission.
Estimating Net Proceeds
Once you’ve been given an estimate of market value by your REALTOR®, you can get a rough idea of how much cash you might walk away with when the sale is completed. This can be particularly useful when you start looking for another home to buy.
To estimate your net proceeds, from the estimated sales amount, subtract the applicable costs in the three sections outlined below: seller’s costs, buyer’s/seller’s costs and closing costs.
Click here for a free no obligation estimate of seller proceeds based on whatever price you think your property would sell for.
Buyer’s/Seller’s Costs: Additionally, as your REALTOR® can tell you whether local customs or rules dictate whether the buyer or seller pays for certain costs associated with the sale of your home. Here are a few examples of negotiable expenses:
- title insurance premium
- transfer taxes
- survey fees
- inspections and repairs for termites, etc.
- recording fees
- Homeowner Association transfer fees and document preparation
- home warranty protection plan
- natural hazard disclosure report
Closing Costs: As far as closing costs are concerned, you and your eventual buyer may agree on any arrangement that suits you, no matter what local practice dictates. As your REALTOR® I will assist you in estimating what your final closing costs will be.
