How to Choose a Listing Price When Selling Your Home (SHORT SUMMARY VERSION)
Where To Start Thinking About Pricing & Selling Your House
Choosing the right listing price is one of the most important parts of selling your home for the best possible value in the real estate market you are in. It all depends on the real estate market conditions at the time, as well as the condition, features, amenities, and location of your home. The value of a home fluctuates constantly, based on the specifics of the home, combined with supply and demand, and other pertinent economic factors. Pricing your home right can mean the difference between your home sitting for a long time and selling for less than it may have been worth, or your home selling quickly, with multiple offers, and selling over the asking price. It is important to have a level, unemotional head when it comes to pricing your home for sale.
First Considerations
Your first, and possibly the most important decision for maximizing the amount of money reaching your pocket is choosing a skilled Realtor. Choose a Realtor who is an expert in your market area, has documented experience, is knowledgeable, does the work full time, and who lists your house in such a way that they create buyer demand. Get our 10 Question Interview Guide HERE. Expert Realtors know how to advertise and market your house. This will attract the maximum number of potential buyers and get your house sold. More buyers often means increased desirability and demand for your property.
Determining an Appropriate Listing Price When Selling Your House
A home is only worth what people are willing to pay for it in the current Real Estate Market. So, Realtors research similar homes and what they sold for most recently. You have to research homes that are as similar to your home as possible, that have SOLD recently. Yes, you can only use SOLD homes to compare your values. Why? Sold homes give you an idea of what price people are actually willing to pay for a similar home in your area with the current market conditions.
These homes are called “comparables” or “comps”. They compare the square footage, beds, baths, kitchens, and even try to compare how updated these homes are and their conditions comparable to your home. The key is to look for homes that are as similar to your home, as close to the location of your home as possible, and that are the most recent sales. You have to consider the condition of the home and assess if it is updated or outdated, any desirable amenities, privacy, land, views, and other important factors like that and compare them to recently sold properties like yours.
The Consequences of Overpricing Your Home
Overpricing can be detrimental to the sale of your home. When houses are overpriced, they sit on the market. The longer they sit, the higher the likelihood they will develop what I call a “stigma”. When people look at a house the first thing they look at is photos. Then they digest the data. One of those pieces of data is “DOM” or days on market. The higher that number gets, the bigger the stigma. People literally begin to wonder what is wrong with the house. This can ultimately result in you getting less than you should’ve for your house.
If you price it right, in this market, it will go within a week or two. A few of our houses have recently sold in one weekend, with over 10 offers, over asking price. A few have even approached $50,000 over the asking price. *Because they were priced right, and as a result, there were bidding wars. Now, will this always be the case, for every house? No. But being well informed and having a good strategy can increase your chances.
The other thing to consider is that sometimes people list their houses at irrationally inflated dream prices, therefore a listed unsold home is not the most accurate data point to compare to. Those houses typically sit for a longer time, and if they sell, they can sell for less than they are worth because of the stigma that arises due to the house sitting on the market for a while. We’ve found that people begin to think there is something wrong with a house that sits, whether that is right or wrong. So when choosing a price, be smart and informed about it. Or at least choose a knowledgeable agent to work with who can help you with this.
Strategic recommendations for a listing price?
Like I discussed earlier, you have to know the current market conditions, as well as the market conditions within the town, and even in the neighborhood, your home is in order to strategically price your home to get top dollar.
There are a number of strategies for pricing to discuss with your agent, based on current market conditions and your goals. For example, sometimes it might be prudent to price a house slightly under the estimated market value, because it might generate a lot of interest and could spark a bidding war based on current market conditions, potentially driving the sale price up. Other times, it might be the opposite. Perhaps it’s the right time to consider value range pricing. It all depends on your strategy for maximizing your value and achieving your goals. But, there must be a plan based on sound data. The bottom line is, the decision to price your home shouldn’t be about feelings or a hunch – it should be based on recent dependable data, and your individualized home and personal situation.
What About Home Value Estimates on Home Search Websites?
I don’t recommend that potential sellers rely too heavily on any internet-based home valuation tool in general. Here is why: these tools base their home values off of an average of recently sold homes in the area. Most of the time, the algorithm compares only the square footage, the number of beds, and baths. And then, it averages all of the recent sales, including that information, to come up with a value range. It does not typically take into account the condition of the home or how updated it is. Nor does it include any amenities or features like that huge walk-in closet or the vaulted ceilings. Here is one of the drawbacks: you know that similar house in your neighborhood that was half falling down and was never updated? The internet-based valuation tool includes that house, and averages it in with yours, dragging your value estimate down.
My recommendation is to call your Realtor and ask them to come and do a FREE In-Home Consultation. Contact us to schedule a FREE In-Home Consultation here, with no obligation. Ask the Realtor if they can run comps for you because you want to know what they recommend for a listing price. Or contact us today and we can run a detailed Home Value Report for you and email it over. It includes a home value, market report, comps, as well as other pertinent data relevant to your specific market.
Should I Do Major Repairs Before Listing?
Many of our clients ask if they should do work prior to listing their home and some even delay meeting with their Realtor as they go through their home with a fine-toothed comb, or engage in expensive updates and repairs. This may or may not be advisable. My recommendation is to meet with your Realtor first! Why? Because you might think you need to spend $15,000 on something like a fence, BUT if it doesn’t increase the potential resale value of your home – then you just lost $15,000. So meet with your agent first.
Schedule a FREE In-Home Consultation and have your agent walk through the home. As you are walking through, ask them about fixes and updates you were considering. Depending on the condition of your home, and the current state of the Real Estate market, it may or may not be worth doing anything. For example, this past summer home inventory was extremely low, and there were many many buyers for every one house that went on the market. Would a fence really make a difference if you are already getting 25+ offers on similar houses as it is? The answer is not likely.
As a general rule of thumb, if the renovation will net you more money it might be worth it. But you also have to take into account timing, how long the work will take, the effort and stress involved, etc. If it doesn’t make you more money and help you sell the house faster, then its not likely worth it. A good agent can market your house however it sits for the most part.
In conclusion, think carefully about your strategy for pricing. Consult a knowledgeable and experienced professional full time Realtor to help you think about the current market conditions, your home and how it is positioned within that market, and your goals. Then review comparable sales and determine what price point will best help you to achieve your goals.
— Eric Coury
**Disclosure: The views and opinions expressed in this blog are those of the author alone and do not represent the views or opinions of Keller Williams. The contents of this blog are not meant to be interpreted as individualized advice. Please consult your tax advisor, attorney, broker, and/or financial advisor for specifics on your situation. Copyright © Eric Coury, Colonial Classic Realty LLC
