Setting a List Price for Your Home

Setting the list price for your home involves many factors i.e. market conditions and financial factors.

Find a Balance Between Too High and Too Low

The most important factor when setting a list price for your home is to understand a buyer’s frame of mind.

If you set the price too high, your house won’t be picked for viewing. Buyers buy by comparison. Buyers will compare your home to other homes for sale in your neighborhood. If you price your home too high, your home simply looks too expensive to be considered.

If you price too low, you'll short-change yourself.

Please keep in mind, buyers buy by comparison. No matter how attractive and polished your home is, buyers will compare your price with everything else on the market.

You may wonder why it is always about CMA. CMA is your best guide to set the price for your home. It is a record of what the buying public has been willing to pay in the past few months for similar homes in your neighborhood.

I 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.

The purpose of Competitive Market Analysis (CMA) is to help in estimating a possible sales price for your home. The analysis will include data on nearby homes that failed to sell in the past few months, along with their list prices.

A CMA is not an appraisal. The CMA I provide may include homes currently listed for sale, are currently pending and recently sold. For the average home sale, a CMA probably gives enough information to help 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, if co-owners disagree about price or if there is any other circumstance that makes it difficult to put a value on your home.

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 few days. Conversely, when the market slows down, average DOM can run into many months.

In a seller's market, you can price a bit beyond what you expect, just to see what the reaction will be.

In a buyer's market, you may need to offer an attractive bargain price in order to sell your home promptly.

If You Price High, Set a Schedule for Lowering the Price

Some sellers list at the rock-bottom price they would take. Others add on thousands to the estimated market value "just to see what happens."

If you have the luxury of enough time to feel out the market, please let me know. I, however, would suggest to set an advance schedule for lowering the price if need be.

Please read "Overpriced Home" section before you make the decision.

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 lender.

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."

Estimating Net Proceeds

Once you’ve been given an estimate of market value, you can get a rough idea of how much cash you might walk away with when the sale is completed. This can be useful when you are looking for another home to buy.

Seller’s Costs: Subtract the following costs as applicable.

• payoff figure on your present home loan(s)
• broker's commission
• prepayment penalty on your loan if you have any
• unpaid property taxes
• title insurance premium
• transfer taxes
• survey fees
• repairs for termites, etc.
• recording fees
• Homeowner Association transfer fees and document preparation
• home protection plan (optional)
• natural hazard disclosure report

Closing Costs: 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. I will help you in estimating what your final closing costs will be.