You’ve deliberated back and forth and decided to sell your home, giving you the opportunity to change neighborhoods or upgrade your home office with a new suburban abode. But now comes arguably the hardest step of all: pricing your home to sell.
How you price your home will in large part determine whether your home flies off the market or sits without interest for months. Price your house too low and you could undersell it to a great degree. Price too high and you may miss out on buyer interest while your listing is fresh, leading to a drawn-out sale and eventually a discounted offer.
Pricing your home is a deceivingly complex calculation. It involves knowing which features of a home drive value and those that may subtract from it, all while keeping emotions at bay. Even in a strong seller’s market with record home sales, it’s possible to overprice your listing based on the success of your neighbors.
Follow these steps to set a price that will attract buyers and maximize resale value. Once you arrive at the perfect price, you can feel confident letting your house hit the market.
I’ve seen clients come in too high that would’ve gotten that desired number if they had come in in the middle and let the market take over.
- Susan Boyer Real Estate AgentCloseSusan Boyer Real Estate Agent at JPAR Silverpath- THE GENESIS GROUP Currently accepting new clients
- Years of Experience 13
- Transactions 125
- Average Price Point $328k
- Single Family Homes 110
Start with an instant home value estimate
Detailed property data is widely available online. Sellers now have a head start with the ability to do more preliminary research and access information about their home in an instant.
To begin your pricing research, get a quick online home value estimate from a tool like HomeLight’s Home Value Estimator. While it shouldn’t entirely dictate your pricing, an online home value estimate can give you a reasonable price range to begin your work.
Enter your address and answer a few basic questions about your home, and we’ll provide a preliminary home valuation in less than two minutes.
Online valuation tools are only a starting point for pricing your home to sell. They won’t give you all the information you need in pricing your home, and they use limited data.
For example, it might compare your property with a home on your street that sold for $50,000 less than it could have.
“Maybe it needed new flooring, there was damage done, it had pets and it needed a new rug,” says Susan Boyer, a top-selling Utah real estate agent with more than 10 years of experience. “There are different reasons why an online evaluator is not going to know that, so it might under-price your house.”
So while they’ll give you a good foundation, your next step should be to connect with a trusted real estate agent who knows every inch of your market. An agent will factor in details that aren’t always measured by these automated tools that may substantially decrease value (or add to it!), such as recent upgrades, water views, a proximity to a high-voltage power line, noise levels, positioning on a steep hill, or general buyer sentiment in the area.
Review the comps provided by your agent
To determine home value, your real estate agent will conduct a comparative market analysis (CMA) that analyzes local comparable sales or “comps.”
Comps are homes similar in size, amenities, structure, and age to your own that recently sold in your area. Real estate professionals and home appraisers use comps as a reference point for the subject home and then make dollar adjustments based on competitive differences. The analysis will take into account significant features that drive or reduce value.
What makes a house a “comp” for yours?
A home can be a comp if it sold recently, is close by, and has a lot in common with your home. But agents follow some basic guidelines to find the most accurate comparables.
- It’s in the same ZIP code, ideally within the same neighborhood or within a mile or two radius.
- It’s roughly the same square footage, usually within a 10-20% range of your home.
- It has the same number of bedrooms and bathrooms.
- It was sold within the last 90 days.
- It was built around the same time or, ideally, within five years of your home.
- It’s in the same condition as your home and has similar renovations.
- It has similar amenities, such as a garage, pool, etc.
- The nearby features are similar (i.e., walkability, school district, public transportation, etc.).
Why do comps work to price your home?
Comps work because they give you real-world data on how similar homes near you fared in the current market. The goal of pricing a home is to identify what a buyer would pay for it, and comps are the breadcrumbs that help you arrive at that conclusion.
A CMA, by analyzing a group of six to 12 comps, provides clarity around how your home equates to the competition in the context of other relevant market trends such as inventory levels, price per square foot, and average days on market. This matrix of data provides a well-researched price range recommendation that reflects the conditions in your market.
With home sale records readily available in many markets online, you may be eager to find comps yourself and make a comparison on your own. But a real estate agent will be able to do it more efficiently and with greater detail. They have access to tools like the MLS database that provide more recent sales and details about comparable properties. Not to mention it’s one less task off your plate.
If you aren’t sure where to begin your search for a real estate agent, online agent-matching platforms such as HomeLight make it quick and easy to find great candidates. Tell us a few details about your home and selling timeline, and we’ll provide recommendations for up to three top real estate agents with extensive knowledge of your local market.
Watch out for these pricing fallacies
So now you know what goes into pricing your home to sell. But what are some common mistakes to watch out for? Let’s take a look.
You overvalue certain renovations
It may come as a surprise, but not all home renovations have a positive ROI. In fact, Remodeling Magazine reported that the average payback for 22 common professional remodeling projects in 150 major U.S. markets was only 60% in 2021. That means your renovations likely won’t translate into a dollar-for-dollar increase in home value. So, if your bathroom remodel cost $25,000, you may be looking at more like a $14,000 increase in property value.
You put emotions over logic
No matter your reasons for selling, emotions always go into a sale. Your home is a special place, and letting go of it can often be difficult. If there’s sentimental value attached to your property such as memories or your parents or grandparents, pricing can be especially challenging.
It’s important to let logic supersede emotion when setting your price. Think about it from the buyer’s perspective: Just because the home means a lot to you doesn’t necessarily add monetary value to the property. And the right price is your best shot at commanding the value your home deserves.
You neglect to consider eyesores and ‘earsores’
If you’ve lived in your home for some time, you’ve most likely learned to ignore the items that used to bother you. But when setting your price, take some time to look at your home through an objective lens. Are there any noises, blights, or unsightly views that a new homeowner might notice? Maybe there’s a lot of traffic on your street or train tracks nearby. Or perhaps some power lines block your bedroom view. These negative features could require you to lower your price.
Give your home credit where due
With all of that said, don’t be too hard on your home. You put a lot of effort into making it a comfortable and pleasant place for your family, so while it’s important to be realistic, give your home praise where it’s warranted.
It’s helpful to have your agent take a quick tour of your home. “We’re someone who knows the area and has feet on the ground,” Boyer says. An agent can see first-hand what specific features might play to your advantage and increase your home’s value.
For example: if you have picturesque water views or are within walking distance of schools, your agent will most likely consider that. Or, if you recently updated all of your kitchen appliances, then they may factor the cost of that into your pricing.
Some other considerations that may give your home more credit:
- Size of your yard and its amenities
- Recent renovations that increase your home’s value
- Nearby restaurants or shopping centers
- Finished basement
- Larger lot size
Factor in your selling motivations
Every seller has their own reasons for parting with their home and the circumstances around every sale are different. Maybe you’re trying to buy a home at the same time, or perhaps you need to hurry your sale in order to move. All of that will likely factor into your pricing.
If you need to move quickly, it might be beneficial to lower your starting price, so you’re able to attract more aggressive offers, advises Gladys Blum, a top real estate agent in Salem, Oregon. Your agent will likely go over your timeline and selling motivations in your first meeting, so they have all the information ahead of time.
“I’m going to say, ‘Hey, if you want to sell, what’s more important: time or money?” says Blum, who works with over 67% more single-family homes in Salem than the average agent. “If you want to sell it in 60 days, we need to be below your competition.”
Look for a price range ‘sweet spot’
Boyer, the Utah real estate agent, says clients in today’s seller’s market will see a friend or neighbor sell their home for $50,000 over the asking price. In trying to emulate their success, they usually want to set their price high. But more often than not, she says, that turns out to hurt them in the end.
Instead, Boyer suggests finding the middle ground — a range that’s not too high, not too low, and not too crowded. In doing so, you’re creating competition instead of fighting it.
Let’s say your agent believes your home is worth between $320,000 to $350,000. At the moment, several homes in your neighborhood are priced at $325,000, and several more are priced around $345,000 to $350,000.
Your ideal price might be right in the middle, about $330,000 to $335,000, which is free of other sellers. Even though that may be less than you’re hoping to get, you’re opening yourself up to attractive offers while also showing buyers you’re fair.
“You drive a lot of offers which creates competition and actually helps you get the high-end price,” Boyer says. “I’ve seen clients come in too high that would’ve gotten that desired number if they had come in in the middle and let the market take over.”
Remember how buyers find homes now: Online
With today’s technology, your home’s first showing isn’t at an open house or in a private tour. It’s online. Over 50% percent of recent buyers found the home they purchased on the internet, and 95% of buyers used some sort of online tool during their home search in 2021.
So it’s vital to cater your price toward online searches that attract a wide range of potential buyers, says Blum. For example, if you price your home at $302,000, you’re missing out on all the buyers that capped their search at $300,000 for just an extra $2,000.
“Buyers search for homes in $25,000 increments online,” says Blum. “If you’re aiming for a buyer who will pay $250,000, you need to price it in that category.”
In addition, keep in mind that these online tools are arming buyers with a wealth of information. Boyer says today’s buyers are savvier than ever and are very attuned to the market. So by the time they do come to your open house or set up a showing, they likely already know what the home is worth.
As of Q3 2021, 54% of agents have seen or heard about buyers backing out of contracts due to remorse about inflated prices. So, homebuyers are paying attention to overpricing.
Be ready to make price adjustments as needed
As painful as it may be, sometimes setting a price once isn’t enough. Even if you’ve done your research, your price may not be working in the current conditions.
According to the National Association of Realtors®, 35% of recent sellers reported reducing their listing price at least once. So, you must respond to market feedback and adjust your price accordingly, even after your property is listed.
For Boyer, the most significant factor she considers when determining if and when a price reduction is necessary is the average days on the market (DOM) for your area. If the DOM for your location is around 20 days and your property has been listed for nearly 40 days, then your agent will likely suggest you drop your price.
Contrary to popular belief, price reductions aren’t all bad. Blum says she’ll sometimes reduce a list price by $1,000-$2,000 just to get buyer attention.
“If there’s a price change of any kind, whatever buyer has looked at that property online is going to be notified,” she says. “If they looked at it or liked it at all, they’ll be reminded of the home.”
If you’re not open to adjustments, you run the risk of letting your house linger on the market, which could be a red flag for some buyers.
Skip market anxiety and request a cash offer
If your home isn’t getting any offers — no matter the changes you make — or if the process is just too stressful, you have other options.
The most straightforward alternative may be to request a cash offer from an iBuyer (a company that uses pricing technology to make a near-instant offer on your home). Essentially, you provide a few details about your home, the iBuyer names their cash price, and then you decide whether you want to accept or decline the offer.
The advantages of this are that you get a cash offer without the stress of marketing and showing your home, and the uncertainty of a sale falling through. The disadvantages are that you may receive a lower offer than you were hoping for and you might not have much negotiating power to counter.
If this route interests you, consider requesting a cash offer from HomeLight’s Simple Sale platform. Rather than do the work of pricing your home and staging it for the market, you will answer a few questions, such as how much work the home needs and how soon you plan to sell, so we can learn a little bit more about your situation.
Within 48 hours, we’ll provide you with a full cash offer with the ability to close in as little as 10 days.
Going this route provides you with a low-stress selling experience that’s much quicker than most transactions that require financing. Instead of debating your selling price or possibly going through multiple price reductions, you could be well on your way to that new beautiful neighborhood or spacious two-story with the quiet home office.
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