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, I 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. I 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: 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 specific features into consideration since no home is alike. 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.
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.
If You Price High, 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, I will sit down with you 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 and don not 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 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 me, 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 (see Sell, then 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
· NJ Transfer Fees (0.6% – 1.0%)
Buyer’s/Closing Cost: 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
· flood insurance