| Setting Your
List Price
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 by determining:
Pricing
Considerations
In setting the
list price for your home, you should be aware of a buyer’s
frame of mind. Based on a list of houses for sale in your neighborhood
(which can be in the form of a printed list from your REALTOR® or
online search results that you’ve found yourself), buyers will
determine which houses they want to view. Consider the following
pricing factors:
- If you
set the price too high, your house won’t be picked for viewing,
even though it may be much nicer than others on the street.
You may have told your REALTOR® to "Bring me any offer. Frankly,
I’d take less." But in that list of houses, yours simply
looks too expensive to be considered.
- If you
price too low, you'll short-change yourself. Your house will
sell promptly, yes, but before it has time to find the buyer who
would have paid more.
TIP:
Never say "asking" price, which implies you don't expect
to get it.
To determine
the proper list price, contact a REALTORā and have them provide
you with the following professional services:
- Furnishing
comparable sales.
- Analyzing
market conditions.
- Helping to
determine offering incentives.
- Estimating
your net proceeds.
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Using
Comparable Sales
No matter how
attractive and polished your house, buyers will be comparing its
price with everything else on the market. Your best guide is a record
of what the buying public has been willing to pay in the
past few months for property in your neighborhood like yours.
Your REALTOR®
can furnish data on sale figures for those "comps", and
analyze them for a suggested listing price. The decision about how
much to ask, though, is always yours.
The list of
comparable sales a REALTOR® brings to you, along with data about
other houses in your neighborhood presently on the market, is used
for a "Comparative Market Analysis (CMA)." To help
in estimating a possible sale 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.
This CMA differs
from a formal appraisal in several ways. One major difference is
that an appraisal will be based only on past sales. In addition,
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.
In the normal
home sale, a CMA is probably enough to let you set a proper price.
A formal written appraisal (which may cost a few hundred dollars)
can be useful if you have unique property, if there hasn't been
much activity in your area recently, if co-owners disagree about
price, and 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--the kind that's
complete with photos of the house and neighborhood, a map specifying
the site, and floor plans is sufficient.
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Consider
Market Conditions
A Comparative
Market Analysis (CMA) often includes Days on the Market (DOM)
for each comparable house sold. When real estate is booming and
prices are rising, houses may sell in a few days. Conversely, when
the market slows down, average DOM can run into many months.
Your REALTOR®
can tell you whether your area is currently 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.
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Offering
Incentives
Some sellers
list at the rock-bottom price they'd really take, because they hate
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 a schedule
in advance. 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.
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 such items as:
- Some or all
of a buyer's closing costs; and
- Discount
points required by the buyer's lending institution; or
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
offer before Christmas."
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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 as you start
looking for another home to buy.
From the estimated
sales price, subtract:
- Payoff figure
on your present loan(s);
- Broker's
commission;
- Any prepayment
penalty on your mortgage;
- Attorney's
fees, if any; and
- Unpaid property
taxes.
In addition,
your REALTOR® can tell you whether local customs or rules expects
the buyer or seller to pay for the following items:
- Title insurance
premium;
- Transfer
taxes;
- Survey fees;
- Inspections
and repairs for termites and the like;
- Recording
fees;
- Homeowner
Association transfer fees and document preparation;
- Home protection
plan; and
- Natural hazard
disclosure report.
As far as closing
costs are concerned, you and your eventual buyer may agree on any
arrangement that suits you, no matter what local practice dictates.
Your REALTORā will assist you in estimating what your final closing
costs will be. It is difficult to predict what the exact closing
costs will be when you negotiate with a particular buyer.
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