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O Common Questions for Sellers
Pricing Your Home
Setting 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 the following, which are further explained below:
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Pricing considerations
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Comparable sales
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Market conditions
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Offering incentives
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Estimated net proceeds
Pricing Considerations – Find a Balance Between Too
High and Too Low
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 may
not be selected for viewing, even though it may be much nicer than other homes
on the street. You may have told your representative to "Bring me any
offer. Frankly, I’d take less." But compared to other houses for sale,
your home simply looks too expensive to be considered.
If you set the price too low, your house may
sell promptly, but you may make less on the sale than if you had set a higher
price and waited for a buyer who was willing to pay a more proper value.
Price Against Comparable Sales in Your Neighborhood
No matter how attractive and polished your house is, buyers will be comparing its price with everything else on the market. It is important for your REALTOR® to make the proper adjustments for upgrades and any special considerations that may add value to your listing.
·
Your
best guide is a record of what the buying public has been willing to pay in the
past few months for properties in your neighborhood. Your REALTOR® can furnish data on sales figures for
those comparable sales and analyze them to help you come up with a suggested
listing price. The decision about how much to ask, though, is always yours.
·
Competitive
Market Analysis (CMA): The
list of comparable sales a REALTOR® brings to you, along with data
about other houses in your neighborhood that are presently on the market, is
used for a Comparative Market Analysis (CMA). To help in estimating a possible
sales price for your house, the analysis will also include data on nearby houses
that failed to sell in the past few months, along with their list prices.
·
A
CMA differs from a formal appraisal
in that an appraisal is done for a fee while the CMA is provided by your REALTOR®
and may include properties currently listed for sale and those currently pending
sale. For the average home sale, a CMA probably gives enough information to help
you set a proper price.
·
Formal
Written Appraisal: A
formal written appraisal (which may cost a few hundred dollars) can be useful if
you have a unique property, if there hasn't been much activity in your area
recently, if co-owners disagree about price or if there is any other
circumstance that makes it difficult to put a value on your home.
TIP: If you do order a market value appraisal, make it clear you don't need an elaborate, or full narrative report, i.e., the kind that's complete with photos of the house and neighborhood. Floor plans and a site map is sufficient in most cases.
Market Conditions – Is it a Buyer’s Market or a
Seller’s Market?
A
CMA often includes a Days on the Market (DOM) value for each comparable house
sold. When real estate is booming and prices are rising, houses may sell in a
shorter time. Conversely, when the market slows down, average DOM can run into
many months.
Your REALTOR® 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, just to see what the reaction will be. In a buyer's market, if you really need to sell promptly, offer an attractive bargain price.
If
You Price High, Set a Schedule for Lowering the Price
Some
sellers list at the rock-bottom price they'd really take, to avoid bargaining.
Others add on thousands to the estimated market value "just to see what
happens." If you want to try that, and if you have the luxury of enough
time to feel out the market, sit down with your REALTOR® and work out an
advance schedule for lowering the price if need be.
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 any prospective buyers, you may need to lower your list price again. Plan on doing that regularly until you find a level that attracts buyers. Make a written schedule in advance, before emotion takes over and you're tempted to dig your heels in.
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 house 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 sale before Christmas."
Estimating Net Proceeds
Once
you’ve been given an estimate of market value by your REALTOR®, you can get a
rough idea of how much cash you might walk away with when the sale is completed.
This can be particularly useful when you start looking for another home to buy.
To
estimate your net proceeds, from the estimated sales amount, subtract the
applicable costs in the section outlined below:
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Payoff amount on your present mortgage
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Broker's commission
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Prepayment penalty on your mortgage
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Attorney's fees
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Unpaid property taxes
