How to Price Your House to Sell
The pricing of your home is perhaps the single most important factor when selling your house. Here is how to price your house to sell.
You’re ready to put your house on the market but aren’t sure how to price your house to sell. Some questions that come mind may be:
- What are the best ways to get this done?
- Do you need to work with a real estate agent or can you find this information on your own?
Price it too high and you may not get any interested buyers. Overpricing and not getting any interested buyers may also cause your home’s appeal to die down after the first few weeks of listing. Price it too low and you could lose out on getting the best or fair value of your home.
Pricing your home accurately means making sure you do a proper comparative market analysis (CMA). This will give you the best range in which you should price your home.
What you paid for your home doesn’t really matter
A lot of homeowners may already have their price in mind, based on how much they paid for the house, plus a little more. While this makes sense in theory, the market may have changed significantly since you purchased the property, so what you paid for the home may not matter anymore. Start with a blank slate and don’t use your home’s purchase price as a jumping point.
How to do a comparative market analysis (CMA)
There’s something called “comps,” which simply means comparable sales of homes that sold in your area. These would be homes that are similar to yours. A comp analysis includes how many days the home was on the market and the final sale price.
If you’re working with a real estate agent, she will provide you with a CMA, but be sure to double check that on your own.
Even if you don’t plan on using a real estate agent, you can still reach out to local real estate agents to request a CMA. You could also connect with an independent appraiser, who would be able to provide a fair market value for your house. You’d likely have to pay out of pocket for this expense.
You can find most of the data you need on real estate listing sites. When pulling comps, look for the following comparable properties in your area:
- Distance: Within ¼ to ½ of a mile from your home, if possible, and in the same school district
- Age of the house: Built within five years of your home
- Size: Property should be a similar size to yours, give or take a few hundred square feet
- Home features and rooms: Similar to yours
- When it was listed: Not any older than three months on the market (appraisers don’t look at comps that are older than six months)
Price your house to sell for the current housing market
After doing comps and finding the range, consider the following market factors that may affect how you ultimately price your property.
This really has to do with demand and inventory. If there are a lot of homes in your area for sale, competition will go up and your house may end up sitting on the market longer than you’d like.
But if the market is hot and your house is one of only a few in the area that’s on the market, it might sell faster. It’s easier to price your house to sell in this situation, and you might get your asking price or more.
- Buyer’s market: Home prices may be priced lower, simply due to too much inventory
- Seller’s market: Homes may be priced higher, since inventory is smaller and there’s less competition
- Neutral market: There’s an even balance of homes for sale and buyers.
Seasonality: Winter vs summer
The best time to sell a home is in the spring. This is because the weather is milder in most parts of the country. Families with kids may want to start looking so they can schedule the move in the summer, when kids are on summer break.
Fall is also a good time, while winter is the slowest season. Seasonality depends on the city and what the weather is like in that region of the country.
Price tactic tip: Use value range marketing
Your house is only worth what a buyer is willing to pay for it, despite what the comps say. Sometimes, sellers will use value range tactics to price their homes. This is basically the amount you’d sell the property for if a potential buyer paid for your house right now.
It’s a tactic that opens the door to negotiate and reach a price that is both fair for the buyer and seller. So, for example, instead of pricing the house for $350,000, you could price it between $299,000 to $350,000.
The other tip here is to go just slightly below $300,000—the lowest price in the example is $299,000. This helps with buyers who are doing online searches based on price filters.
Price tactic tip: Use price banding
Price banding means looking at the inventory in your neighborhood and finding the sweet spot to stand out from other homes in your area. For example, if most homes are priced between $250,000 to $300,000, and the next price for homes start at $320,000, consider pricing your house at $310,000.
Leave some cushion when pricing your house
Round off your asking price in $5,000 increments. In other words, if you want to price your house for $297,000, round it up to $300,000. Another tip is to cover closing costs for a buyer, especially if they’re a first-time homebuyer. This may help move the purchase process along faster.
See also: What is Your House Really Worth?
If you’re unsure, you can always adjust the price
In order to test the waters with your price, you could potentially do a soft rollout that shows your house as a “coming soon” listing online. If potential buyers click on your price, it could be a good sign that your house is priced accordingly and that people are interested.
The last word on price
When looking at homes in your area, don’t overlook certain factors such as the proximity of a busy freeway, railroad, and high-traffic streets.
The most important part of pricing your house is to first do comps in the area and consider the season and the amount of inventory in your area.