Pricing Your Home
If you’re about to put your house on the market, you’re probably wondering, “How much can I get for it?”
Pricing is all about supply and demand. It is part art and part science, and no two agents will price property in the same way. Some agents are much better at figuring out how to price your home than others. Experience matters. Our broker has 30+ years practice.
You don’t want to overprice the house because you will lose the freshness of the home’s appeal after the first two to three weeks of showings. After 21 days, demand and interest wane.
On the other hand, don’t worry about pricing it too low because homes priced below market value often will receive multiple offers, which will then drive up the price to market.
We are ready to help you:
1. Figuring out your home’s likely market value, and
2. Settling on a list price that will most effectively bring in offers at (or above) that value.
Real estate prices can fluctuate quickly and widely, which is why it’s important to look at a number of sources in appraising your home’s current value. We use all available tools to develop a solid Comparable Market Analysis for your home:
Pull Comparable Listings and Sales
• Look at every similar home that was or is listed in the same neighborhood over the past three months. Appraisers do not use comps older than 3 months.
• The list contains homes within a 1/4 mile to a 1/2 mile and no further, unless there are only a handful of comps in the general vicinity or the property is rural.
• Compare similar square footage, within a 10% variance of up or down from the subject property, if possible.
• Similar ages. One neighborhood might consist of homes built in the 1950s next door to another ring of construction from the 1980s. Values between the two will differ.
• Adjust pricing for lot size variances, configuration and amenities / upgrades.
Withdrawn & Expired Listings
• Look for patterns as to why these homes did not sell and the common factors they share.
• Think about the steps we can take to prevent your home from becoming an expired listing.
Square Foot Cost Comparisons
• Remember that after you receive an offer, the buyer’s lender will order an appraisal, so you will want to compare homes of similar square footage.
• Appraisers don’t like to deviate more 25% and prefer to stay within 10% of net square footage computations. If your home is 2000 sq. ft., comparable homes are those sized 1800 to 2200 sq. ft.
• Average square foot cost does not mean you can multiple your square footage by that number unless your home is average sized. The price per square foot rises as the size decreases and it decreases as the size increases, meaning larger homes have a smaller square foot cost and smaller homes have a larger square foot cost.
• In a buyer’s market, your sales price might allow some wiggle room for negotiation but be strong enough (near the last comparable sale) to entice a buyer to tour your home. For example, to sell in this market, you might need to price your home at $149,900, settling for $145,000.
• In a seller’s market, you might want to add 10% more to the last comparable sale. When there is little inventory and many buyers, you can ask more than the last comparable sale and likely get it. So $150,000 home might sell at $165,000 or more.
• In a balanced or neutral market, you may want to initially set your price at the last comparable sale and then adjust for the market trend. For example, if the last sale closed three months ago, but the median price has edged upwards of 1% per month, pricing at $154,500 would make sense.
Once you know your home’s value and have a price range in mind, it’s time to nail down the final “list” price.
Here are three pricing strategies for sellers:
- Appeal to the “herd mentality”
Given the high stakes of real estate, a buyer doesn’t want to be the only one interested in a house. By pricing your property on the lower end of the value range, you could stimulate interest among more than one buyer and create a herd mentality. Also, if you’re under the gun to sell quickly, this would be a good option.
- Price it to be found in real estate searches
Most buyers tell their agent they want a three-bedroom home in a certain neighborhood under $500K (or some other dollar amount). Their real estate agent may then set up an automated buyer search in their local database for properties under $500K. But if a home is listed at $510K, that buyer will miss it. So, if your list price is higher out of the gates, you may miss a segment of buyers.
While this scenario happens frequently, many savvy agents will set up search parameters for their buyers to include properties listed a little bit more above their price ceiling. Knowing how flexible home prices can be, buyers should be made aware of properties that could be a good match for them, even if those homes are above — but within reasonable range of — what they want to pay. Often times the buyer can offer under the list price, or the property will get reduced.
- Don’t get ‘creative’ with your asking price
Sometimes, sellers want to get creative with their asking price, for example $787,777. Such an oddly specific figure calls attention to itself for no good reason, like a house painted purple. Buyers will often wonder why the seller chose that figure. From there, they get curious about who the seller is, and so on. The goal is to showcase the property, not the seller, and to appeal to as wide an audience as possible. Getting quirky with your asking price counteracts this tried-and-true strategy.
- Appeal to the “herd mentality”
Online estimates of your home’s value
Online sites will give you an estimate of your own home’s value based on information drawn from public records about the house and of past sales of (theoretically) comparable properties. Don’t be surprised if your estimates (or in Zillow-talk, your “Zestimate”) look to be way off the mark, or even tens of thousands of dollars different from each other. As many experts have commented, generating a number via a computer algorithm is no substitute for having a live human not only check the accuracy of the basic data, but adjust for all the factors the computer can’t see. But here’s the main reason to check your online estimates: Buyers will be looking at them! If the estimates are far lower than your list price, they may underbid. If the estimates are far higher, that’s better — but cases have been reported of buyers who shied away from such houses, worried that the seller knew of some deep dark reason that the place wasn’t worth what the online estimates said it was worth. Be proactive about your online estimates, particularly if they’re low — you can go onto the sites and enter data about your own house, which will both give the public a better sense of the place and might actually raise your estimates.