Did you hear about the home for sale across town with the crazy asking price? No?
That’s because nobody is talking about it. The wrong list price generates the worst kind of publicity for your home: radio silence.
Unfortunately, many homeowners don’t believe this and also think their pride and joy family home of 30 years is worth more than it is. Others yet want to “test” the limits of the market to squeeze a few extra thousand dollars out of their biggest financial asset.
But to market your house competitively, you need to set a price based on the facts. Think seasonality, local market conditions, and your home’s unique characteristics over memories and emotions. So to bring you back down to earth, we asked real estate agents proven to sell homes faster and for more money about their go-to house pricing strategies.
Here we’ll explain the thinking behind each one in plain terms so you can better add to the pricing conversation and make a more informed decision about this crucial first step of your home sale.
House Pricing Strategy #1:
Start with a free online home value estimate, but don’t stop there
When you set out to nail down an asking price for your house, automated valuation models (AVMs) can be a useful launch point.
These tools take real estate market data and property details such as your home’s square footage, location, number of beds and baths, and more, then run all the information through an algorithm to give you a ballpark figure for what your home is worth.
HomeLight’s free valuation tool pulls information from multiple sources to create a real-time home value estimate based on current market trends. We also use a 7-question quiz to learn more about your property and to enhance the accuracy of our estimate.
Sounds great, right? Well, one word of caution: Home estimate tools are not an end game for your pricing strategy. Real estate agents will factor in hundreds of minor details that aren’t always measured by AVMs, like a home’s proximity to a big power line, noise levels, positioning on a steep hill, or general buyer sentiment in the area.
So use an AVM to satisfy your own curiosities and get a good read your home’s fair market value, but be ready to see the big picture and account for all the nuances before you settle on a price.
House Pricing Strategy #2:
Set your price based on an analysis of comparable sales, not your emotions
Auto dealers look to the handy “Kelley Blue Book” to check on prices and values for cars. But you won’t find any such pricing guide equivalent for your house — the same make and model of your 2-story colonial in another part of town could be worth double what yours would sell for.
Because property values are hyperlocal and always shifting, real estate professionals such as agents and appraisers instead rely on comparable sales, aka “comps,” to price individual houses.
A comparative market analysis (CMA) puts your home side-by-side against other recently sold properties similar to yours in location, size, and condition. The “strategy” here is to size up the competition and nail down a price range, from which you can add or subtract value based on your home’s unique positioning, features, and upgrades.
House comps also put a reality check on your rosy-eyed view of a home that holds so many memories, where pencil marks on the walls once tracked your changing height and then later the growth spurts of your own children.
“My emotional sellers have been in the homes for generations when their parents owned that property,” says Loretta Thomason, a top-selling real estate agent from Austin, Texas, who on average works with 65% more properties than her peers.
“But, when gentrification takes over certain areas of town, and they see everybody else selling their homes and the houses have been remodeled, sold for $400,000, they’re not taking into account that there’s $150,000 of work that’s been done.”
Thomason explains how many of her clients want to get the “most out of the very last of their legacy” but fail to consider how their home isn’t in the same condition as the competition.
But, that doesn’t mean you should spend months remodeling every room just to raise your asking price. That would require going head to head with investors and home flippers who have more money, time, and experience than you in the business of turning a profit on home renovations.
You’d be better off using the comps to set your price range and then keeping major projects to a minimum.
To command your full asking price, make minor changes and get the house show-ready — paint over loud walls with neutral colors, replace any dated carpets with new flooring, deep clean every room, and declutter like you would for company, times 100.
House Pricing Strategy #3:
Set your price below the competition to start a bidding war
Undercutting your price on purpose? Sounds crazy, right? You’re trying to fetch more for your home….not less.
But, there is a time and a place for this strategy.
The first is in a buyer’s market, when there are more homes on the market than buyers out there making offers, a supply and demand imbalance that gives buyers the upper hand.
In that case, pricing even slightly below your competition can make your home stand out from the noise and reduce your days on market.
Underpricing is also a smart move if your home is on the older side and needs upgrades or repairs that you simply can’t afford or aren’t willing to make.
In any case, a lower asking price doesn’t lock you into a lowball sales price. In fact, undercutting your price in the right circumstances can generate more than one offer and create a sense of urgency among buyers.
“We still end up getting the price [we wanted] because we end up in multiple offer situations,” Thomason explains.
Multiple offers? Yup — you just started a bidding war!
And as a bonus? “We don’t end up with picky buyers asking you to make all these repairs and updates,” Thomason says.
However, even in a bidding war situation, don’t get too greedy to the point where you jeopardize the sale. If you set up multiple rounds of bids or continually pit buyers against one another to test how far they’ll go, you could wind up frustrating everyone involved and might have to settle for a lower offer than your original price.
“When I anticipate a bidding war, I ask [buyers] for the best and highest as their very first offer. And then they will know that I’m not going to come back and ask again,” explains Thomason.
She is transparent with buyers and their agents, letting them know where they stand.
House Pricing Strategy #4:
Adjust your price to account for online pricing benchmarks
Once you nail down your home’s approximate value, small price adjustments may boost your listing’s visibility on the most popular home search websites.
That’s because on sites like Zillow, buyers narrow down their search results with filters — and the most important filter is price. Buyers set the minimum and maximum price they’re willing to pay in $25,000 or $50,000 benchmarks, and then only view homes that fall into that specific range.
So say list your home as $352,000. Buyers who set their maximum price at $350,000 will never see your listing in their pool of results.
“Even if my buyer’s cap is $350,000, I’ll bump it to $355,000, because it is possible that there’s a property in there for $351,000 that they can clearly afford. But, just based on their cap they would miss it,” explains Thomason.
Not every buyer will have an agent like Thomason in their ear walking them through the process. Most will just set their range based on their budget, not thinking about the ins and outs of how the filters work.
So it might be worth setting your price just under the filter threshold to get noticed, considering that 44% of buyers start their home search online, typically through their mobile phones, and 52% of buyers found the home they ended up purchasing online.
This strategy isn’t without its risks. Let’s say you originally priced your home around $355,000. A reduction to the $350,000 price range would require a $5,000 sacrifice, and there’s no guarantee you’ll get that money back in negotiations.
House Pricing Strategy #5:
Price your home based on the seasonal shifts of your market
Did you know that homes sell faster and for more money during different times of the year, depending on buyer behavior and the seasonality of your market?
Our data shows it’s possible to boost the profits on your house by over 75% if you sell at an opportune moment.
Your market may experience a spike in buyer demand in the spring and summer months, while parents snatch up homes and look to get settled before the school year starts.
You might see another surge in the early winter, when buyers relocating and starting new jobs need to find a new house, pronto.
Markets with a high density of retirees could see an uptick in the fall when snowbirds like to purchase second homes just in time to escape the cold weather up North.
How does this translate to pricing your home?
Let’s say you knew that homes in your area go for about 5% above list price during the market’s peak season. You could justify a higher price point knowing that during this time of year, buyers are going head to head and willing to pay more.
To time your listing just right, use our Best Time to Sell Calculator to figure out which months are best for maximizing the sale price for your home.
House Pricing Strategy #6:
Going to shoot the moon against our advice? Set boundaries in case you need to cut your losses
Home buyers weren’t born yesterday — they’ve done their research and pulled comps to get a good idea of the going rate for homes on your block.
If you’ve priced your home way above the competition, you’ll be hard pressed to book any showings. But, let’s say you’re set on a higher price point and refuse to budge. At the very least, you need a clear plan for how to cut your losses if and when your house sits on the market longer than it should.
One of Thomason’s strategies with sellers who won’t budge on price is to set a strict time frame around it based on how fast homes are selling in that particular neighborhood.
“I always ask my sellers not to overprice, but if I feel like they’re going to, I get a commitment from them upfront that they will reduce the price within 10 to 12 days after it’s been on the market,” she says.
The average time a home spends on the market depends on a variety of local market factors, such as interest rates, property value trends, and home inventory levels. According to the National Association of Realtors’ (NAR) 2019 Profile of Home Buyers and Sellers, recently sold homes were on the market for a median of three weeks.
Get the price right and the rest will fall into place
As you can see from the overview of the top house pricing strategies, setting the perfect asking price for your home is part art, part science, part psychology — and 100% necessary for a successful home sale.
Understand how your home compares to the competition, aside from the wonderful memories it holds. Work with a real estate agent who can be your objective set of eyes and who has their thumb on the pulse of your real estate market. Show your home in its best light to back up the list price your house deserves.
Then watch as your home hits the market and immediately generates buzz in your community, simply because you played it smart and priced it right from the start.