“Pricing a Home for Sale” is part two of our six part “How to Sell a Single Family Home” series. Check out Part 1: How to Find an Amazing Real Estate Agent.
Remember what it was like when you first bought your single family home?
You probably wanted the best house in the location of your dreams for the lowest price possible.
Buyers today aren’t much different than how you were back then: they look for competitively priced homes in their price range. You need to find the sweet spot when you price yours, because without the right price tag, you could lose thousands of dollars or you could not make the sale at all.
According to our Top Agent Insights Survey, 51% of real estate agents selected “Pricing a Home for Sale” as the biggest place sellers can make an error. In addition, the National Association of Realtors found that 37% of sellers had to reduce the list price in order to sell their property.
“I had a friend who listed a house at $449,000. Should have been about $429,000. He did not take my advice! He’s actually a REALTOR®. He kept asking my opinion of his price, and I told him. He was at $449,000 and I told him he should have been at $425,000-$430,000. He waited about 6 months, moved out of state and had to have the house professionally cleaned again.
By pricing it too high, in that particular case, he is now at four and a quarter.
So, he went too high to start with and sometimes when people go too high, they end up dropping it more than they would have if they would have priced it right the first time.
If he would have taken my advice 8 months ago, he would have sold it and not had to make payments for 8 months. He might have even gotten higher than that. You never know.
Again, when you go too high on the price, then the property could just sit there and become stale. Then you have buyers do the same thing. They want to lowball because they see it as a stale property.”
You want to get the most for your property, but you have to remember that your real estate agent wants you to make the most as well. Dale’s situation alone should prove that overpricing the home does not make the home seem more “valuable” to buyers, nor will it get you more in the long run.
You should not, however, price the home too low either, because you could lose money that way as well. The bullseye of pricing your home to sell is only as elusive as you make it.
We put together a short series of exercises that mimic the way your real estate agent figures out the price of your home.
Our exercises are meant to teach you to understand why the agent lists your single family home at the price point he does, and to recognize if the agent is quoting you a higher (or lower) price than is reasonable for your neighborhood.
How Your Agent Determines Fair Market Value for Your Single Family House
“Fair Market Value” is the amount your house is worth based on the current status of the real estate market in your area and the features of your home. Your real estate agent finds the fair market value of your single family home by running a comparative market analysis of all of the homes sold in your neighborhood in the past 2-3 months. These homes will have similar features to your house, i.e., square footage, number of bedrooms and bathrooms, and amenities.
Your real estate agent will analyze these homes and then generate a price range for your area.
That is, on the low end homes are selling for $X, and on the highest end, homes sold for $Y.
Then, based specifically on the age of your single family home, its square footage, layout, renovations and upgrades you’ve made, and number of bedrooms and bathrooms, you real estate agent comes up with the fair market value for your home.
Based on what your they estimate your home’s worth, your agent comes up with a list price. The price will most likely be at or below the fair market value for your house. This is to price the home competitively to get the most buyer attention possible without pricing your single family home too low so that you lose money.
For a quick glance at how much your home is worth right now, you can use our online home value estimator.
We’ll average the top 5 home value estimation sites (like Zillow, Eppraisal, RealtyTrac, HomeJunction, and House Canary) to give you a more accurate approximation for your single family house. While these sites may not be as accurate as your agent’s CMA will be, they’re a quick ballpark estimate so you get a sense of what you’re working with.
You Need to Think About Pricing for the Internet
These days, over 85% of house hunters start the buying process online according to the National Realtors Association. Inevitably, prospective buyers are going to look for and stumble upon your single family home listing out there on the internet. It’s changed the whole game when it comes to pricing and marketing single family homes.
Websites like Zillow will list their estimates of your home’s fair market value and buyers can see if your home is significantly under or overpriced.
According to “Nolo’s Essential Guide to Selling Your House,” you can actually change this number to reflect the actual fair market value of your home, as the estimate will most likely be off.
You can do this by the “Correct Home Facts” feature on Zillow.
1. Google your address and “Zillow” together. Your home should immediately pop up at the top of Google. (Sometimes just searching for your address directly on the Zillow site won’t yield the property address as Zillow prioritizes current listings and recently sold homes).
2. Then, you’ll claim your owner dashboard, verify you’re the owner, and then update the fair market value estimate.
3. The reason you’ll want to update this estimate is to make sure that the list price of your home reflects that the agent has priced it fairly at or under list price, and not significantly over or under list price.
Why Pricing a Home for Sale Impacts Everything Else
According to George Graham, top 1% single family home expert in Seattle, “The bottom line to all of this is pricing it right. If you can price the property at [market value] or slightly below the market, if the seller can buy in on that kind of a strategy…then you’re going to create a cycle of confidence: a high level of traffic at the open house, a high level of interest.
Once you get one offer, you can almost always get a second or a third…If you overshoot the market and you miss that, and there is a lack of confidence, it’s really hard to get that turned around, and the only way to do that is by making price adjustments.”
If the price of your home is too high, none of your other efforts are going to make an impact on buyers. The listing may be filtered out of their online searches because they’re looking in a lower price point, or they may see the price and immediately move on. Make sure the price is right, or all of the work you’ll do to prepare your home for sale won’t make an impact.
Want more advice on selling your single family home? Read part three: The ‘Glass Bubble’ and Joy of Decluttering: Getting a House Ready to Sell.