The secret of a quick home sale is often setting a price that is fair for the seller while attractive for the local market. Many potential sellers have an idea of what they want for a sale price which often relies heavily on the owner’s sentimental attachment to the home mixed in with the age or condition of everything inside. How can a seller set an accurate list price for their home and take emotion out of the equation?
1. Set Realistic Expectations
This home may be the seller’s first home, where the baby took his first steps, or where the teens brought their prom dates for pictures; however, none of that matters to a potential seller. A home price based on the seller’s sentimentality is going to be out of line with the local market. Other common mistakes sellers make when setting a home price include
- Basing the price in reality: Sellers often hope for a large profit when their home is sold and base a sale price that is higher than their own purchase price. The housing market fluctuates and buyers are only interested in getting the best deal possible in today’s market.
- Choosing smart renovations: Some renovations add to the home’s value such as kitchen and bath upgrades but expecting to be reimbursed dollar for dollar at the time of sale is a mistake. According to Remodeling magazine, home upgrades have an average return of 62 percent. Close to listing the home? Concentrate on low-cost improvements that have a big impact on a home’s cosmetic appeal.
- Expecting to negotiate: If the home price is too high to start with, scores of potential buyers will pass it by as they read the listing. Worse yet, they’ll never even see the listing if the price is outside their search parameters. A new listing sees the most activity in the first 30 days and a seller wants to ensure they get as much traction as they can out of that first month.
2. Get an Appraisal
An appraisal is a great way to understand a home’s worth as well as potentially save a good amount of time for sellers. The buyer’s loan company will require an appraisal before closing but having a seller’s appraisal will offer pricing guidance. No matter what price the buyer eventually agrees to, having a sale price that is higher than the buyer’s appraisal can cause serious problems on the road to closing.
3. Consult with Your Agent
Real estate agents have a plethora of pricing tools at their disposal. Most importantly, agents can pull a comparative market analysis (CMA) for your area. The CMA aggregates local data on recent home sales. The strongest indicator of the future housing market is recent home sales. Sometimes called comparables or comps, these recent sales of homes that are of similar type, size, age, and condition show what the local market is willing to bear and should factor heavily into price setting.
Conventional wisdom states that "location, location, location" is one of the most important components in a home sale, and the CMA takes into consideration all of the factors associated with the home’s local market including amenities, schools, recent sales, and neighborhood walkability. Some neighborhoods are in high demand because of their local amenities and this can factor heavily in the CMA.
4. Take Advantage of Search Parameters
Established research shows that buyers are more amenable to prices that are set just below a century mark. For example, if the target sale price is $201,000, try setting the listing price at $199,000. Not only is this price psychologically more attractive, it allows the home to appear in Internet searches where the highest home price is set for $200,000. When the sale price is greater than the nearest century mark, a seller’s listing can be ignored by price savvy shoppers.
5. Stand Out From the Crowd
Once a seller has a good idea of a fair market price, he or she should work closely with their agent to examine the current local listings. The final listing price should stand out from the crowd in some way. Listings tend to fall within "price bands." For example, if most homes in the neighborhood are listed between $175,000 and $177,000 and the next closest is $190,000, the seller would like to be in their own lane so to speak. Setting a price in the low $180s is a soft spot in the local market and will help draw attention to the listing.
Gary Ashton is the CEO/Owner of The Ashton Real Estate Group of RE/MAX Advantage in Nashville, Tennessee.