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 by determining:
Pricing
Considerations
In
setting the list price for your home, you should be
aware of a buyer’s frame of mind. Based on
a list of houses for sale in your neighborhood (which
can be in the form of a printed list from your REALTOR®
or online search results that you’ve found yourself),
buyers will determine which houses they want to view.
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 others on the
street. You may have told your REALTOR® to "Bring
me any offer. Frankly, I’d take less." But
in that list of houses, yours simply looks too expensive
to be considered.
- If you price too low, you'll
short-change yourself. Your house will sell promptly,
yes, but before it has time to find the buyer who
would have paid more.
TIP:
Never say "asking" price, which implies you
don't expect to get it.
To
determine the proper list price, contact a REALTORâ and have them provide you with the
following professional services:
- Furnishing comparable sales.
- Analyzing market conditions.
- Helping to determine offering
incentives.
- Estimating your net proceeds.
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Using
Comparable Sales
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 like
yours.
Your
REALTOR® can furnish data on sale figures for those
"comps", and analyze them for a suggested
listing price. The decision about how much to ask, though,
is always yours.
The
list of comparable sales a REALTOR® brings to you, along
with data about other houses in your neighborhood presently
on the market, is used for a "Comparative Market
Analysis (CMA)." To help in estimating a possible
sale 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.
This
CMA differs from a formal appraisal in several ways.
One major difference is that an appraisal will be
based only on past sales. In addition, 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.
In
the normal home sale, a CMA is probably enough to
let you set a proper price. 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, and 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--the
kind that's complete with photos of the house and neighborhood,
a map specifying the site, and floor plans is sufficient.
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Consider
Market Conditions
A
Comparative Market Analysis (CMA) often includes Days
on the Market (DOM) 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
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.
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Offering
Incentives
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 a schedule in advance. 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.
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 such items as:
- Some or all of a buyer's closing
costs; and
- Discount points required by
the buyer's lending institution; or
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. An example of the wording
for such an offer may be "to the broker who brings
a successful offer before Christmas."
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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 as you start looking
for another home to buy.
From
the estimated sales price, subtract:
- Payoff figure on your present
loan(s);
- Broker's commission;
- Any prepayment penalty on
your mortgage;
- Attorney's fees, if any; and
- Unpaid property taxes.
In
addition, your REALTOR® can tell you whether local customs
or rules expects the buyer or seller to pay for the
following items:
- Title insurance premium;
- Transfer taxes;
- Survey fees;
- Inspections and repairs for
termites and the like;
- Recording fees;
- Homeowner Association transfer
fees and document preparation;
- Home protection plan; and
- Natural hazard disclosure
report.
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 REALTORâ will assist you in estimating
what your final closing costs will be. It is difficult
to predict what the exact closing costs will be when
you negotiate with a particular buyer.
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