Determining a List Price for Your Home

The list price for a house involves evaluating various market conditions and financial factors. During this phase of the home selling process, your REALTOR® will help you set your list price by determining:

Pricing Considerations. In setting the list price for your home, you should be aware of a buyer’s frame of mind. Buyers will determine which houses they want to view, based on comparison with other homes that are on the market and those that have recently sold. 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 others on the street. You may have told your broker to, "Bring me any offer. Frankly, I’d take less." But in that list of houses, yours simply looks too expensive to be considered.
If you sell the home before there has been market exposure, you may shortchange yourself by selling too low.

Using Comparable Sales. 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 few months for property in your neighborhood like yours.

Your REALTOR® can furnish data on sale figures for those comparisons and analyze them for a suggested listing price. The decision about how much to ask, though, is always yours.

The list of comparable sales, along with data about other houses in your neighborhood presently on the market, is used for a "Comparative Market Analysis (CMA)." To help in estimating a possible sale 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.

This CMA differs from a formal appraisal in several ways. One major difference is that an appraisal will be based only on past sales. In addition, an appraisal is done for a fee while the CMA is provided by your REALTOR® and may include properties currently listed for sale and those currently pending sale.

In the normal home sale, a CMA is probably enough to let you set a proper price. A formal written appraisal (which may cost a few hundred dollars) 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 and any other circumstance that makes it difficult to put a value on your home.

Note: If you do order a market value appraisal, make it clear you don't need an elaborate, or full narrative report—the kind that's complete with photos of the house and neighborhood—a map specifying the site and floor plans is sufficient.

Consider Market Conditions. A Comparative Market Analysis (CMA) often includes Days on the Market (DOM) 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.

A real estate agent can tell you whether your area is currently a buyer's market or a seller's market. 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, if you really need to sell promptly, offer an attractive bargain price.

Listing Agents Sell to Other Agents. Contrary to popular opinion, the listing agent does not usually attempt to sell your home directly to a homebuyer. That would be inefficient.

Listing agents market and promote your home to the hordes of other local agents who do work with homebuyers, dramatically increasing your personal sales force. During the first couple of weeks your home should be a flurry of activity with buyer’s agents coming to preview your home so they can sell it to their clients. That is, if the price is right.

If you and your agent have overpriced, fewer agents will preview your home. After all, they are real estate experts, and it is their job to know local market conditions and home values. If your house is dramatically above market, why waste time? Their time is better spent previewing homes that are priced realistically.