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, your REALTOR® will help you set your list price based on:
- Comparable sales
- Market conditions
- Market strategy
Pricing Considerations – Find a Balance Between Too High and Too Low
When setting a list price for your home, you should 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. Or, it will be picked for viewing, enabling the agent showing your property to sell another house that is priced more fairly relative to the market.
If you set a price that is too low, you will most likely short-change yourself, but then again in today’s market with a shortage of inventory, maybe not. In today’s market a house that is priced “too low” may attract multiple offers!
Price WITH A VIEW TO Comparable Sales in Your Neighborhood
No matter how attractive and polished your house is, 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 a similar property in or near your neighborhood. Your REALTOR® can furnish data on sales figures for those comparable sales and analyze them to help you come up with a suggested listing price. The 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 and will only include properties that have been exposed to the market.
Formal Written Appraisal: A formal written appraisal (which may cost several 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. If you go this route it is important that you use a highly qualified appraiser.
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 that sold recently or that did not sell and was taken off the market. 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, offering an attractive 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. If that doesn’t bring any prospective buyers, you may need to lower your list price again. 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.
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.
Seller’s Costs: Subtract the following costs as applicable.
- payoff figure on your present loan(s)
- broker’s commission
- prepayment penalty on your mortgage (if any)
- attorney’s fees
- unpaid property taxes
Buyer’s/Seller’s Costs: Additionally, your REALTOR® can tell you whether local customs or rules dictate whether the buyer or seller pays for the items listed below. Subtract the following costs, as applicable.
- title insurance premium
- transfer taxes
- survey fees (if applicable)
- inspections and repairs for termites, etc.
- recording fees
- Homeowner or Condominium Association transfer fees and document preparation (if applicable)
- home protection plan (if applicable)
- 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. Your REALTOR® will assist you in estimating what your final closing costs will be.
You as the Seller may want a Market Analysis.