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How to Price Your Home Listing
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In less than one year, we’ve gone from the hottest real estate market that I’ve personally seen — to the second coldest market that I’ve ever seen. And right now, homeowners who are looking to sell their homes are finding that it really isn’t easy anymore.
That’s why, as a seller, you need to make sure that you are pricing your home correctly.
By listing your home for sale at an accurate price for current market conditions, you’ll be staying competitive, and you might just be able successfully to sell your home — even in an ice cold market.
Adjust Your Expectations
Often times, sellers may overvalue their homes. Honestly, it’s an understandable and completely natural thing to do.
Sellers want to get as much as they can from the sale of their home. The problem is — if a house is priced too high, it won’t sell at all, and the seller will not make any money. In fact, they might lose money on the operational cost and upkeep of the home.
So really, it’s just best to get it right the first time.
Instead of making an emotional decision or assuming that your house will sell for the same listing price as others in the area, you need to look at the sales data.
Usually this is something your real estate agent would do for you, but I’ll show you can do this yourself.
Find a Real Estate Website Connected to the MLS
Back in the day the MLS (Multiple Listing Service) used to have a big old book of homes for sale that only real estate agents had access to.
Not anymore though!
Nowadays the MLS is an online database that real estate agents still have almost exclusive access to — though there are some exceptions.
With the rise of online real estate brokerages, we’ve started to see some sites connect directly to local MLS databases.
Redfin is one such example of this. It’s by far my favorite tool for the most complete, up-to-date real estate market data. There are still still features missing that only true MLS access has, but as far as home pricing goes — this is all you need.
(It’s important to know that Zillow is NOT recommended for market research. They are connected to a few local MLS databases — but largely, they aggregate their data from public records and information uploaded by private individuals. As you might guess, this leads to extreme inaccuracies and significant delays in listing data).
Look For Comparable Home Sales (Comps)
Alright, here’s the fun part. Now we get to look for comparable homes sales in the area (comps).
When you’re looking for comps, you want to make sure that you’re filtering out all active listings. You want to make sure that you are only searching for houses that have already sold.
(Remember, anyone can list their house for any price — it doesn’t mean it’s an accurate market price. Only previous sales will give you a correct market value.)
Distance
Next, you want to narrow your search down to within 1 mile or less of the home you want to sell. This is important because home values can vary tremendously from neighborhood to neighborhood.
Bedroom Count
Once you’ve done that, you want to make sure that you are searching for sales of homes with the same number of bedrooms that your home has.
So if you have a 3 bedroom house, you want to make sure that you narrow down your results only to houses that have 3 bedrooms.
Living Area (Square Footage)
Finally, you’ll want to narrow your results just a little bit more by searching for homes with approximately the same square footage as yours.
I like to give a about 100 sq ft of wiggle room in my searches, so if I have a 1000 sq ft house, I might search for sales of houses between 900 sq ft and 1100 sq ft.
It’s important to keep in mind that garages and other types of unfinished spaces do not toward the square footage of a living area.
Once you’ve narrowed your search down, you need to select 3–5 records that resemble your own home. These are the homes that we are going to compare prices with.
[*Note: Make sure to search for the same type of housing too. You don’t want to be comparing condos to single family homes. That just doesn’t make sense! You want to compare condos to condos and single family to single family.]
Account for Condition & Features
Once you’ve got your 3–5 comps selected, it’s time to actually start comparing.
Now, this part isn’t an exact science. However, with enough familiarity in your local market, it will get easier.
The goal here is to see how well your comps compare to the home that you are trying to sell.
Is the landscaping better or worse?
Is the carpet in better or worse condition?
Is the kitchen updated or not?
These are just a few examples, but it can be much more detailed as well.
You’ll really need to account for the financial variance in all differences when comparing the homes.
This can be hard, but if you get enough practice you should be able to come up with a reasonably accurate market price for your home.
[See my Youtube video above as I walk through the process.]
Keep it Competitive Pricing (Slightly Under Market)
Once you’ve found an accurate value for your house, it’s time to think about competitive pricing.
Your first reaction might be to list your house at the same price as the value you just found through your comp analysis.
It’s tempting sure, but it might not actually be the best decision.
In a hot seller’s market and even in a cooler market like we’re experiencing right now, you might want to price under market value.
Pricing just a little bit under market value — say, maybe $10–$15k depending on your market — will often get buyers excited about the fact that they’re getting a good deal.
That, in turn, often leads to a multiple offer situation. Which, in some cases will get you a higher offer than the original market price you were considering.
(REAL LIFE EXAMPLE: After comp analysis, I found that a house was worth $210,000 in my market area at the time. I listed the home at $200,000 and after numerous showings I received 6 multiple offers. The offer I accepted was $216,000. A whole $6,000 more than I probably would have received had I listed at might my original $210,000 price.)
Conclusion
Figuring out the market value can be difficult, but it’s not impossible.
It is a skill that needs to be practiced and you can do this at home on your own.
Still, when the time comes to list your home for sale, it’s always a good idea to check with a local, experienced real estate professional.
They can guide you in the right strategy for listing your home for sale…the first time.
© Oh Hey, It’s Ray
This article was originally published on OhHeyItsRay.com
Oh Hey, It’s Ray is a real estate investor, entrepreneur, and former real estate agent. She lives happily with her husband and two children in the Pacific Northwest. See more from Ray at her YouTube channel and on Ohheyitsray.com