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 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.
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. 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.
Condition Adjusted Comparative Market Analysis (CMA)
A scientific analysis of the area pertaining to your home. It consists of a list of comparable sales and data about other houses in your neighborhood that are presently on the market and under contract. It takes your property’s specific features into consideration, since no two homes are alike. To help in estimating the likely sales price range for your house, our analysis will also include data on nearby houses that failed to sell in the past few months, along with their list prices.
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.
Sellers: Calculating The Net Proceeds
In evaluating a purchase offer, the seller should estimate the amount of cash he or she will walk away with when the transaction is complete. For example, when the seller is presented with two offers at the same time, he or she may discover it may be better to accept the one with the lower sale price if the other has less of a down payment.
Once the seller has a specific offer, calculating net proceeds becomes simple. From the proposed purchase price the seller can subtract the following costs:
- Payoff amount on present mortgage
- Any other liens (equity loan, judgments)
- Broker’s commission
- Legal costs of selling (attorney, escrow agent)
- Transfer taxes
- Unpaid property taxes and water and other utility bills
- If required by the contract: cost of survey, termite inspection, buyer’s closing costs, repairs, etc.
Your present mortgage lender may maintain an escrow account into which the seller’s deposit money to be used for property tax bills and homeowner’s insurance. In that case, the seller will receive a refund of money left in that account, which will add to their proceeds.
Set a Schedule for Lowering the Price
Some sellers list at the bottom price they’d really take, because they do not have the luxury of time and expect multiple offers. Others list above 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, we will sit down with you and work out a 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 and don’t let emotions take over – this is business.
Offering Incentives to Hasten a Sale
Sometimes cash incentives are as effective as lowering the price, especially in the first-time buyer price range where buyers may be tight on cash. An offer to pay some or all of a buyer’s closing costs can entice cash-strapped buyers.
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 buyer’s 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 we’ve provided you with an estimate of market value, you can get a rough idea of how much cash you will walk away with when the sale is completed. This can be particularly useful when you start looking for another home to buy (see Sell, then Buy…?).
To estimate your net proceeds, subtract the applicable costs in the three sections outlined below from the estimated sales price: seller’s costs, buyer’s costs if you will be contributing to these, and closing costs.
Seller’s Closing Costs
Subtract the following costs as applicable.
· Payoff figure on your present loan(s)
· Broker’s commission
· Prepayment penalty on your mortgage, if any
· Attorney’s fees
· Unpaid property taxes
· New Jersey Transfer Fees (0.6% – 1.0%)
Buyer’s Closing Cost
Subtract the following costs, as applicable.
· “Mansion” tax, if applicable
· Survey fees
· Inspections and repairs for termites, etc.
· Recording fees
· Homeowner Association transfer fees and document preparation
· Home protection plan
· Natural hazard disclosure report
· Flood insurance, if applicable