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 based on:
- pricing considerations
- comparable sales
- market conditions
- offering incentives
- estimated net proceeds
- How Much Is Your Home Worth?
Pricing Considerations – Find a Balance Between Too High and Too Low
When setting a list price for your home, you should be aware of a buyer’s frame of mind. 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 other homes on the street. You may have told your REALTOR® to
"Bring me any offer. Frankly, I’d take less." But compared to other
houses for sale, your home simply looks too expensive to be considered.
If you price too low, you'll
short-change yourself. Your house will sell promptly, yes, but you may
make less on the sale than if you had set a higher price and waited for a
buyer who was willing to pay it.
TIP: Never say "asking" price, which implies you don't expect to get it.
Price Against Comparable Sales in Your Neighborhood
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. Your REALTOR® 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.
Competitive Market Analysis (CMA): The list of comparable sales a REALTOR® brings
to you, along with data about other houses in your neighborhood that
are presently on the market, is used for a "Comparative Market Analysis"
(CMA). To help in estimating a possible sales 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.
A CMA differs from a formal appraisal in
several ways. One major difference is that an appraisal will be based
only on past sales. Also, 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. For the average home sale, a CMA probably gives enough
information to help you set a proper price.
Formal Written Appraisal: 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 or if there is
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, i.e., the kind that's
complete with photos of the house and neighborhood. Floor plans and a
site map is sufficient in most cases.
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.
Your REALTOR® can tell you whether
your area is currently in 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.
If You Price High, Set a Schedule for Lowering the Price
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 an advance schedule for lowering the price if need be.
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.
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 lending institution.
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 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 when you start
looking for another home to buy.
To estimate your net proceeds, from the estimated sales amount, subtract
the applicable costs in the three sections outlined below: seller’s
costs, buyer’s/seller’s costs and closing costs.
Seller’s Costs: Subtract the following costs as applicable.
- payoff figure on your present loan(s)
- broker's commission
- prepayment penalty on your mortgage
- attorney's fees
- unpaid property taxes
Buyer’s/Seller’s Costs: Additionally, your REALTOR® can
tell you whether local customs or rules dictate whether the buyer or
seller pays for the items listed below. Subtract the following costs, as
applicable.
- title insurance premium
- transfer taxes
- survey fees
- inspections and repairs for termites, etc.
- recording fees
- Homeowner Association transfer fees and document preparation
- home protection plan
- 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.
Your REALTOR® will assist you in estimating what your final closing costs will be.
Charonda Wills
Broker Associate
REMAX Properties, Inc
Colorado Springs CO 80906
317-538-5060
No comments:
Post a Comment