Selling your home on the market is stressful. One of the most challenging pieces is setting an initial asking price that will maximize the amount you make, and get an offer in the timeframe you desire. Local realtors that you interview will have insights based on local market conditions, but it’s always good to get a baseline understanding of your home’s value. Realtors can misjudge market conditions and value, and some will try to convince you to list higher or lower than the optimal price.
We at Frontier Homebuyers are veterans of buying and selling real estate. Today’s article will cover methods and strategies that have proven time and again to work for us. Keep reading to learn how to set your asking price.
Know Your Market
Do some research and find out what comparable homes are selling for in your area. Look up homes that are actively listed on the MLS, Zillow and for sale by owner sites. A couple rules of thumb: first, stay as close to your neighborhood as you can and try not to cross major roads in your search for similar properties. Second, filter these homes by square footage, number of bedrooms and bathrooms, and year built to get an accurate idea of how close these homes are to yours. Finally, glance through the pictures on the listings, noting how updated (or not) the homes are, especially the kitchen, bathrooms, and flooring.
Take note of how long the properties have been listed. Especially in today’s white-hot market, if a home has been on the market for awhile, it is likely priced too high. Think about supply and demand, if there are many homes on the market, buyers will be at an advantage. Some markets also simply take longer to sell in than others, independent of other factors. We typically see longer sale times in rural markets.
In addition, you can ask a couple of realtors for a more detailed CMA. (Comparative Market Analysis.) Many realtors will offer this free of charge, as a marketing technique. Requesting a CMA should not put you under any obligation to the realtor. Who knows, they might even have a buyer for you. A good realtor should also be able to tell you statistics like average days on the market for homes in your area, and average selling price/square foot as another benchmark to gauge your listing price.
Be Realistic
You might have a price in your head of what you want to get for the home, but make sure this price is realistic. Buyers are savvy, and depending on your market, they may have a number of options.
They want to get a good deal and find a value just as much as you want to get a good price for your house. The trick is to find that sweet spot. You don’t want to price your home too high and have to make multiple cuts to the price.
These price drops will show on the MLS, and repetitive price changes can make you look desperate or indicate that something may be wrong with the house. A good rule of thumb is to allow for only one price drop if absolutely necessary.
To make sure your asking price is based in reality, it might be beneficial to have a professional appraisal done.
Ask Opinions
In addition to asking realtors for a detailed CMA, you can also ask friends, neighbors, and family. Ask for their opinion and see what they would pay for a home like yours.
Getting multiple opinions from a variety of people can help you find a middle ground as well as help you find additional selling points you may have overlooked.
There Can Be More To It Than Just The Final Sale Price
Maybe you can offer a lower price for the home, however, the buyer has to pay the closing costs. Or maybe you can get your asking price, so long as the furniture comes with the house. Do you need a longer settlement to have time to find a new house, or the buyer need a longer settlement time to leave their old house? All these things are negotiable and may not be reflected in the final price. Remember, there are no rules to creative bargaining in a real estate transaction, and often times both parties can get a better deal with a little creative thought.
Finally, the most leverage you will have in terms of price and beneficial terms to you is getting multiple offers, and quickly! Doing these means your listing price should error towards the middle of the range rather than trying to stretch and list for the absolute most you think is possible. Doing so will immediately turn off a number of buyers and mute your initial interest. Remember, the price your house will sell for is primarily based on supply and demand. If there are 5 buyers vying for your property, the odds of a bidding war are greatly increased and will likely push your final sales price up. If there is tepid interest or a sole bidder because your property is significantly overpriced, you will likely have to wait longer, and ultimately even end up having to cut the price significantly.
Final note: as professional home buyers and sellers, we use data to inform our decisions on listing price. Emotion can often enter in and cloud the judgement of a homeowner. The best advice we can offer to a homeowner is to get a minimum of 3 independent CMA’s from realtors, and look at the low, high, and middle numbers. If they are very close, that’s a good sign that you have a very good range to list. If they are far apart, really dig in with the realtors on how they arrived at that number.