The single most important factor to consider when selling a house is the price. How much is your house worth in today's local real estate market? You don't want to overprice your home because you will lose the freshness of the home's appeal after the first two to three weeks of showings. After three weeks, demand and interest wane. On the other hand, don't worry about pricing it too low because homes priced below the market will receive multiple offers, which will then drive up the price to market. Pricing is all about supply and demand . . . part art and part science.
This is How a Professional Real Estate Agent Prices Your Home
1. Analyzes Comparable Listings and Sales
Looks at all similar homes listed in the same neighborhood over the past six months.
The list should contain homes within a 1/4 mile to a 1/2 mile and no further, unless there are only a handful of comps in the general vicinity or the property is rural.
Pays attention to neighborhood dividing lines and physical barriers such as major streets, freeways or railroads, and do not compare inventory from the "other side of the tracks. Perceptions and desirability have value.
Compares similar square footage, within 10% up or down from the subject property, if possible.
Looks at similar ages. One neighborhood might consist of homes built in the 1950s next door to another one built in 1980s. Values between the two will differ. Compare apples to apples.
2. Analyzes Sold Comparable Properties
Pulls history for expired and withdrawn listings to determine whether any were taken off the market and relisted. If so, adds those days of the market to these listing time periods to arrive at an actual number of days on market.
Compares original list price to final sales price to determine listing to selling price ratio.
Adjusts pricing for lot size variances, amenities and upgrades.
3. Researches Withdrawn & Expired Listings
Looks for patterns as to why these homes did not sell and the common factors they share.
Which brokerage had the listing: a company that ordinarily sells everything it lists or was it a brokerage that might not have marketed the home properly or has a history of overpricing.Thinks about the steps you can take to prevent your home from becoming an expired listing.
4. Gathers Information About Pending Sales
Since these are pending sales, the sales prices are unknown until the transactions close.
Makes note of the days on market, which may have a direct bearing on how long it will take before you see an offer.
Examines the history of these listings to determine price reductions.
5. Looks at Active Listings Competitively
Your agent approaches other actively listed properties as competitive to your home. To see what buyers will see, you should tour comparable active listings yourself. Make note of what you like and dislike, the general feeling you get upon entering these homes. If possible, recreate those feelings of reception in your own home.
Current active listings are your competition. Ask yourself why a buyer would prefer your home over any of these and adjust your price accordingly.
6. Compares Square Foot Costs
Remember that after you receive an offer, the buyer's lender will order an appraisal, so it is very important to compare homes of similar square footage.
Appraisers don't like to deviate more 25% and prefer to stay within 10% of net square footage computations. If your home is 2000 sq. ft., comparable homes are those sized 1800 to 2200 sq. ft.
Average square foot cost does not mean you can multiple your square footage by that number unless your home is average sized. The price per square foot rises as the size decreases and it decreases as the size increases, meaning larger homes have a smaller square foot cost and smaller homes have a larger square foot cost.
7. Sets Your Price Based on Market Conditions
After all the data is collected, the next step is to analyze the data based on market conditions. For comparison purposes, let's say the last three comparable sales in your neighborhood were $150,000. In a buyer's market, your sales price might allow some wiggle room for negotiation but be strong enough (near the last comparable sale) to entice a buyer to tour your home. To sell in this market, you might need to price your home at $149,900, settling for $145,000.
In a seller's market, you might want to add 10% more to the last comparable sale. When there is little inventory and many buyers, you can ask more than the last comparable sale and likely get it. So that $150,000 home might sell at $165,000 or more.
In a balanced or neutral market, you may want to initially set your price at the last comparable sale and then adjust for the market trend. For example, if the last sale closed three months ago, but the median price has edged upwards of 1% per month, pricing at $154,500 would make sense.