Setting A List Price
How to Set a List Price for Your Home
Setting the list price for your home involves evaluating various market conditions and financial factors. During this phase of the home selling process, we will help you set your list price based on:
- pricing considerations
- comparable sales
- market conditions
- offering incentives
- estimated net proceeds
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 say to “Bring me any offer. But compared to other houses for sale, your home will 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. 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 six months for property in your neighborhood. We will 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, 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 free of charge and may include properties currently listed for sale and those currently pending sale. For the average home sale, a CMA provides enough information to help you set a proper price.
Formal Written Appraisal: A formal written appraisal (which may cost about $450) 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.
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 really expect, just to see what the reaction will be. In a buyer’s market, offer an attractive bargain price.
Offering Incentives to Hasten a Sale
If you haven’t had much traffic through your house, you may want to add the offer of a bonus to the selling broker, in addition to their commission.
Estimating Net Proceeds
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
- septic pumping
- county inspection
- title insurance
- escrow fee
- excise/sales tax
Closing Costs: As far as closing costs are concerned, you and your eventual buyer may agree on any arrangement that is acceptable and allowable.
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