When you’re selling a home, a consequential decision is your list price and pricing strategy. Deciding on your price can be confusing because, sometimes, what you hear from the media is not exactly what your real estate agent is telling you. Additionally, making matters worse is hearing disparate information from different real estate agents.
For example, your home’s market value is not the same as a list or sale price. It’s a common mistake to assume that your home will sell for “market value.” However, market value is an appraisal term that describes a probable price that a home buyer would pay in any given market. Market value can vary depending on the scope and purpose of the appraisal. Knowing the “market value” for your home can build up expectations for your sale that may not be realized. However, until you do an analysis of comparables and market conditions, you won’t have a realistic list price.
Adding to the confusion is hearing that your list price may not necessarily be the sale price. In a buyer’s market, your sale price could be less than list price. In a seller’s market, your sale price could be more than list price.
There’s definitely a science when deciding on a list price, where you can work with real numbers. Unfortunately, the “science” of home pricing is inexact. Determining a list price is much like baking cookies. The end result is similar, but expert bakers have their own recipe. So, although listing agents don’t always agree, there’s some commonality in determining a list price. And much like baking, some pricing “recipes” are better than others.
Part of the inexact science of home pricing is creating a market analysis. The market analysis will guide you in deciding a list price by providing a price range. Although there are basic guidelines for collecting data, agents don’t always agree on the process. However, once you pinned down a price range, then you can decide your pricing strategy by considering your selling motivation, the economy and housing market conditions.
Basically, the market analysis is deciding which recent sales are most similar to your home. The best comparables are homes in your neighborhood that sold in the previous three to six months. The homes in your neighborhood are likely very similar to yours, and recent sales are an indicator of market conditions. However, it’s common to go outside your neighborhood when similar neighborhood sales are not available. These comparables provide a price range. The more adjustments made to comparable sales, the less exact your analysis.
Besides looking at recent sales, you should also look at neighborhood homes that are actively on the market. Active home sales are your competition. These sales can reveal additional market conditions by comparing price and days on market with your sale comparables. You should also consider recent withdrawn and expired sales because they provide insight about pricing strategies that may not work in the current market.
Your pricing strategy is how you decide to position your home in the market. Your goal is to sell for top dollar and least amount of time on market. In determining your pricing strategy, you need to consider your competition, as well as your motivation, economy, and housing market conditions. Also remember that the list price may have to be adjusted as days on market accrue, while keeping an eye on your competition.
Dan Krell is a Realtor® with RE/MAX Platinum Realty in Bethesda, MD. You can access more information at www.DanKrell.com.