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:
- pricing considerations
- comparable sales
- market conditions
- possible incentives
- estimated net proceeds
When setting a list price for your home, you should be aware of a buyer’s frame of mind. 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 in the neighborhood. You may think that buyers will make an offer, but in reality, the buyers' agents may not include your property in their searches. Your home simply looks too expensive to be considered.
If you set the price a little low or at market value, you are likely to have multiple offers, resulting in a higher price.
No matter how attractive and polished your house, buyers will compare its price with everything else on the market.
Comparative Market Analysis (CMA): As your REALTOR®, I can furnish data for comparable sales. The list of comparable sales, along with data about other homes currently on the market, is used for a "Comparative Market Analysis." Depending on the market, I may also include data on nearby houses that failed to sell. With this analysis, I can suggest a list price. The decision about how much to ask, though, is always yours.
Market Conditions – Is it a Buyer’s Market or a Seller’s Market?
A CMA often includes a “Days on Market” (DOM) figure 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.
I 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, to gauge the market reaction. In a buyer's market, if you really need to sell promptly, offer an attractive price.
If You Price High, Set a Schedule for Lowering the Price
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 prospective buyers, you may need to lower your list price again or improve the condition of the home. Plan on regular reductions until you find the level that attracts buyers. Schedule these potential reductions in advance, before emotion takes over and you're tempted to dig in your heels!
Offering Incentives to Hasten a Sale
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 some or all of a buyer's closing costs and discount points required by the buyer's lending institution.
If you haven't had much traffic through your home 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."
Estimating Net Proceeds
After I have prepared a CMA, l will sit with you and review your likely "net" proceeds. To estimate your net proceeds, I will take into account the following customary costs.
- payoff for your present loan(s)
- broker's commission
- attorney's fees
- unpaid property taxes
Buyer’s/Seller’s Costs: I can tell you if local customs or rules dictate whether the buyer or seller pays for the items listed below.
- title insurance premium
- transfer taxes
- survey fees
- inspections and repairs for termites, etc.
- recording fees
- Homeowner Association transfer fees and document preparation
- home protection plan
- 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. I will assist you in estimating what your final closing costs will be.