How To Price Your Home To Sell

Knowing how to price your home to sell for top dollar can make all the difference on having a successful home sale. Getting price wrong is a frequent and costly mistake made by home sellers. As a real estate agent, helping home sellers correctly price their home is a service included in my full-feature home selling service. Here, I will share tips to help home sellers correctly price their home for sale. This will include how to price your home in a seller’s market, too.

Estimate The Selling Price Of A Home

The common misstep by home sellers is they do not know how to find the selling price of a home. Too often sellers focus on the wrong elements, or certain elements too heavily and others too lightly. How to determine the selling price of a home requires a thorough understanding of what features directly affect a home’s value.

The features in your home are likely present in other nearby and recently sold homes. Real estate agents and appraisers use those features to sort homes into brackets of value. Here is a list of what matters. Items appearing first in the list have a greater effect on your home’s sale price than those further down the list.

• Location
• Number of bedrooms
• Number of bathrooms
• Above ground, finished square feet
• Whether there is a garage or not, and garage size
• Home design
• The home has more than one living room
• Whether or not there is a basement, and if so, what type of basement
• Basement level finished square feet
• Build year thinking in the era of that time
• If modern interior features are present or not:
  • Main bedroom bathroom
  • Walk-in closets
  • Large bedrooms
  • Large open common areas
  • Large kitchen
• Updates and overall condition
• Outdoor features and landscaping
• Major home components and systems recently replaced (i.e., roof, furnace, air conditioning unit)
• Lot size (yep, lot size is actually pretty far down the list)

Review The Comps

The first step for how to price a home to sell is reviewing comps. Comps is real estate agent lingo for a comparable home. Real estate agents use sets of comps like baskets and then determine in which basket your home belongs. It is difficult to be precise, too.

Typically, a comparative market analysis (CMA) completed by a real estate agent will produce a range of values which you could expect your home to get on the market. The trick is to price your home correctly so the sale price is at the upper end of the range where it belongs.

Unfortunately, many home sellers misunderstand what is a true comp. So, a home sellers’ review of the average price for selling a house in their area might be wrong because the home seller is using the wrong comps. Here is what makes a good comp:

• Proximity – Home sellers should use homes within a close geographic area to their home. There should be a tremendous amount of similarities between your home and the nearby home’s location. This could include the same school district or same schools if in an extremely densely populated area. The same subdivision is really good, too. The closer to your home the better.
• Recency – Homes that sold more than 12 months ago are not comps. Even better, look more at the last 6 months.
• Similarity – The core features of your home should match the other home, then it can be a comp. Core features include finished square feet, bedroom count, bathroom count, structure design style, and construction era, which is related to the build year.
• Personalization – This is the customized style. If your home was built 20 years ago and you still have builder grade everything, do not compare your home to someone else’s 20 year old home with the latest and greatest modern finishes in every room.

Review Current Active Listings In Your Neighborhood And Nearby Areas

Another strategy for how to determine selling price of a house is to look at homes currently for sale in your neighborhood and nearby areas. Home sellers love to skip past looking at other nearby homes currently for sale. It’s as if home sellers want to live in some fantasy camp where their home is worth 10% or 30% more than their neighbors. I’m sorry to say, it’s probably not. The average home selling price in your nearby area will affect your home’s value.

Instead, embrace homes for sale in your neighborhood and other nearby areas as the competitors they are, but be better than them. Use those prices as guideposts for pricing your home for sale.

If your home is better, price it higher. Or, price it to match or just below a nearby competing home. This will drive more traffic and activity to your home. Who knows, maybe even multiple buyers will become interested in your home at the same time bidding up your home higher.

Watch Out For Pricing Fallacies And Irrelevant Items

Home sellers are easily distracted by what doesn’t matter when pricing a home to sell. Once I had a client who was adamant about the $3,000 he spent having R-35 insulation added to the attic of his home was worth something. Buyers couldn’t have cared less about his R-35 insulation. Here are some tips to keep you focused and away from what doesn’t matter when determining the price to sell your home.

Overvaluing Certain Renovations

Be prepared to take a loss on recent major renovations, appliances, or home systems. Yes, updates do improve a home’s value. But, don’t fool yourself by thinking you can find your home’s sale price by adding up the cost of all the updates and tacking that onto the average cost for a home selling in your area without the updates. It just doesn’t work that way.

Stay Objective And Keep Your Emotions In Check

After years of memories formed at the home and thousands of dollars of home maintenance you value the home more than the common homebuyer will. Remain objective and focused. Homebuyers are not buying your memories and hard work. Instead, they’re just buying the home.

Your Land Isn’t Worth What You Think It Is

Your home is not worth substantially more than others nearby simply because your lot is significantly larger than theirs. The majority of a home’s value is in its usability such as the number of bedrooms and total amount of living space. Therefore, having a two acre lot really doesn’t make your home worth much more than the home with the same features on a quarter-acre lot.

Past Performance Does Not Guarantee Future Results

Just because homes like yours increased in value by 10% last year and the year before that doesn’t mean you can simply add 10% to the value of your home. Real estate markets ebb and flow based on local and macroeconomic issues.

Price High And Let People Make An Offer

Homebuyers’ purchasing behavior has changed, but home sellers have not yet changed their ways in response to this. There is a phenomenon occurring where homebuyers are reluctant to make offers on homes perceived to be overpriced. Unfortunately, many home sellers still list high and justify it by leaving room to haggle. The issue is fewer and fewer homebuyers want to haggle.

More and more businesses have removed bargaining on price for big ticket items. New and used cars have far less room to haggle than years ago. We see the same thing with appliances and furniture, too. It’s as if the consumer has been conditioned to bargain and haggle less.

The correct original listing price to sell your home is the one that stimulates activity and gets conversations started. Don’t think just because your home is for sale that people will want to see it and make an offer. If your price is too high your home will get passed up. Buyers will spend their time with someone who at the outset appears more reasonable and ready to proceed.

Focus On The Positives When Determining Home Selling Price

Think of all of the positives your home has when choosing the right price to sell your home. There are specific features and circumstances which make your home more or less valuable compared to other similar or comparable homes. You should consider those when setting the price.

Here is a list of features and circumstances which have a meaningful effect on a home’s price but are often overlooked by home sellers when determining their home selling price.

• Outdoor amenities – High quality landscaping, hardscape patios, decks, pergolas, and pools can all add value to your home. This becomes especially true when you have high quality outdoor features of excellent construction and in great condition.
• Location – Not enough is said about location but it really does matter. It’s one thing to say your home is in the same city as another. But, close proximity to certain amenities, shopping, and restaurants matters and can increase your home’s value.
• Multiple communal living areas – It’s easy to overlook having multiple living rooms, but this actually has a huge effect on improving the value of your home. This does include having a finished recreation or second living room in your basement.

Find The Goldilocks Zone Of Pricing

With every listing I pursue the home seller always asks me “How do you price a house to sell?” I price a house to sell by finding the range of prices in which it is most likely to sell. I then use the momentum of the market and the finer points of the home being priced to determine where within that range the home is most likely to sell. I call this the Goldilocks Zone.

The Goldilocks Zone is just right. The home is not priced too high or too low, but instead, it is just right. Home sellers need to not get so hooked on one single number. Instead, find the range of likely sale prices for your home. Then, within that range find the even more narrow range of where you believe the home can sell. That is where your price should be.

When To Reduce The List Price

If you are not getting activity it’s probably because of the price. Regardless of the market conditions, everything sells for a price. Everything.

I encourage home sellers to at least mentally commit to price reductions at the beginning of the listing. Essentially, setting performance goals pegged to a timeline. For example, say you want to get the best price for your home, but you also really want to sell it within three months of listing. You should schedule price reductions based on whether or not you received a certain amount of activity within a certain shorter time period. Activity includes online views, showings, and offers.

Bypass The Hassle By Seeking Out A Cash Offer

Sometimes getting the highest home selling price is not the top priority. Time, effort, and energy is all meaningful to some people more so than getting the highest price for a home. Home sellers have more options than ever to receive a cash offer for their home.

I-buyers is the modern term for homebuyers who purchase homes for cash and often with few or no contingencies. The benefit of selling to an i-buyer is a quick, hassle free sale, for cash likely with no appraisal, no inspection, and no repairs, and it is nearly certain to happen on the close date. On the other hand, i-buyers typically pay less than the market value for the home. However, convenience, certainty, and speed is worth something.

Conclusion

Pricing a home to sell merely takes a good understanding of the process to find a home’s market value. So long as you are identifying correct comparable home sales and extracting the right information from each of those you can price your home to sell correctly.

When pricing your home for sale, always stay focused on what matters and ignore what doesn’t. To price your home to sell it should be priced within a reasonable range of what has occurred in the past with similar home sales. Once listed, if your home is not getting the activity you want it to reduce the price.

The Quadwalls Real Estate Team full-feature home selling service includes a pre-listing consultation for free. At this step we give you advice about the likely sale price for your home. Click here to learn more about our full-feature home selling service and low real estate commission fees.