If you’re thinking of selling your house, this is the season. Prices are usually highest in summer, according to the National Association of Realtors. The weather is pleasant and kids are out of school, making it easier for families to move.
But getting the best price and doing so quickly requires sound strategy. Sellers may be torn between two approaches: Price the home lower than everyone else in the hope it will sell fast and maybe even spark a bidding war, or price it high with the idea that you’ll always be able to drop the price if no one bites.
Both approaches have their place. And both carry risks.
Look at it from the perspective of a buyer. Online marketplaces let them know instantly when a new home becomes available in their price bracket. If your home appears overpriced, buyers may reject it without ever setting foot inside.
You’ll know your listing price is set too high if agents aren’t making appointments to show it to buyers. On the other hand, writes Djana Morris, an agent and a Washington Post contributor:
If there have been lots of showings and no offers, feedback from buyer’s agents will be key to figuring out if there is an issue that can be resolved or whether a price reduction is warranted, or both. When a property is priced correctly for the market and its condition, it will receive offers.
If you’ve set the price too high you can always drop it, of course. But older listings generally don’t get the buzz of excitement generated by newer listings. Buyers can see online if a home’s price has been reduced and by how much. They may see reductions as a signal to make a low-ball offer.
Price too low, on the other hand, and you might leave money on the table. Sometimes, in a competitive market with lots of homes for sale, setting a price lower can grab buyers’ attention and spark a bidding war. But that only works under certain conditions. Zillow’s blog explains:
These home[s] are generally in a good location and in their best showing condition. And for all you know, the seller of the low-priced home with multiple offers was in a rush to sell and left money on the table.
Ultimately buyers, not you, will decide your home’s value. The best move is to try to put yourself in buyers’ heads so you can see your home as they do and price it accordingly. Here’s how to proceed.
1. Curb your emotions
It is understandably difficult to make business decisions about a home that holds precious memories. There’s a human tendency to assume that, “if it’s mine it’s worth more.” Emotions can make it hard to have a realistic view of your home’s value. Plan to receive advice with an open mind and be as objective as possible.
2. Get the house in tip-top condition
If you want to set your home’s price ambitiously, make sure it is the best-looking property in its price bracket. Make all needed repairs, clean it until it sparkles, upgrade the paint, carpet and fixtures, and be sure to address potential objections a buyer may have to the home before you list it.
3. Tour competing listings
Become acquainted with the competition by viewing properties for sale in your market in your price bracket. Do this several weeks before putting your home on the market.
4. Get a comparative market analysis
Ask a real-estate agent for a free comparative market analysis (different from an appraisal), in which the agent gathers data on recently sold homes nearby in your price range. These are your home’s “comparables,” or “comps.”
5. Have a heart-to-heart with your agent
If your agent pushes for a lower price than you think is justified, it’s in your best interests to question and understand the reasons. Agents do have an incentive to price a home lower in order to sell it, make a commission and move on to the next sale.
Says the Zillow blog:
An agent who doesn’t get their way on pricing may end up sabotaging your sale. A good agent will agree to support your higher price strategy, but have a price discussion after some time on the market.
Agents with integrity can balance their needs with yours and can explain which strategies work best in your market. It’s critical to find an agent you can trust. Collect recommendations from friends and relatives and interview several agents in your search for a trustworthy professional.
6. Find your own comps
It’s a good idea, even if you are working with an agent, to use the online tools available to buyers to learn all you can about your competition. This gives you expertise in your market, and you might find comps that your agent missed.
Pay particular attention to how competing homes are similar to your property and how they’re different.
- Don’t put much stock in websites’ estimates of homes’ values. These can be highly flawed.
- Use Zillow’s “recently sold” feature to see what homes like yours have actually sold for in the previous few months.
- Check Bigger Pockets’ recommendations of free and fee-based sites for homeowner research.
7. Hire an appraiser
If you want more precision than an agent’s market analysis, hire an appraiser — a professional whose job it is to determine the market value of a home. Use this locator at the Appraisal Institute, which educates and certifies appraisers, to find an appraiser near you. Make sure your appraiser has lots of experience with homes in your market and in your neighborhood. Realtor.com explains the appraisal process and says the typical fee is $300 to $400.
8. Use FHFA’s home price calculator
The Federal Housing Finance Agency’s home price calculator gives a rough idea of how much a home’s value has appreciated since it last changed hands.
9. Hold an open house for friends and family
When your home is in tip-top condition and ready to be listed, give your friends and family a tour and ask their advice on pricing.
10. Listen to your agent’s colleagues
If you engage a real estate agent, your agent typically will hold an open house for other agents, asking what they think the price should be. The collective wisdom of real-estate professionals who know your market can be valuable.
11. Avoid zeros
You probably are familiar with the rule of thumb in sales that says you should avoiding using a price that ends with a zero. Zeroes invite buyers to negotiate, the thinking goes. Instead, the idea is to end a price with a 9 — $239,000 (instead of $240,000), for example. Even though this is a well-recognized sales tactic, the 9 supposedly conveys deliberateness and appears firm. Too many 9s at the end can be off-putting, though: $239,999 just looks tacky.
12. Embrace zeros
A contrary school of thought says zeros are helpful when pricing a home for Internet searches. Here’s the thinking: Pricing a home at $400,000, for example, gets double the exposure because the property will appear in results for Internet searches for homes priced between $300,000 and $400,000, and also in searches for properties between $400,000 and $500,000. A home priced at $399,000 will only appear in search results for homes priced at less than $400,000.
Have you had a home that sat on the market too long or sparked a bidding war? Share your experience in comments below or on our Facebook page.