- The Pricing Dilemma:
Although pricing too high can be a mistake, don’t worry about pricing your home too low. Properties priced below market value will often receive multiple offers that will then drive the price up to market.2 Pricing is all about supply and demand.
- The CMA: Pull Comparable Listings:
First, look at every similar home that’s been listed in the same neighborhood as your property over the last six months. Appraisers don’t use comps that are older than three months, so you might want to narrow the timeframe even more.3
Ideally, you’ll want to come in close to the eventual appraised value of your home.
- Check Out Sold Comps:
Compare the original list prices of the homes to the final sales prices to determine any price reductions. Compare the final list prices to actual sold prices to determine ratios. Ideally, compare to at least three properties that sold at market value.
Most local assessors’ offices will provide lists of sales, and some newspa
- Look for Withdrawn and Expired Listings:
Pull the history of any expired and withdrawn listings to determine whether any of them were taken off the market and relisted. Expired means that the term of the listing agreement ran out without a sale. Withdrawn means that the listing agreement is still in effect, but the homeowner no longer wants to market the property.5
Add these days on market back to the listing time periods to arrive at an actual number of days the properties were on the market. Look for patterns as to why they didn’t sell and note any common factors they might share.
- Pending Sales:
The ultimate sales prices of homes that haven’t sold yet are obviously unknown until the transactions close. But that doesn’t stop you from calling the listing agents and asking them to tell you how much the property is selling for. Some agents will tell you, and some won’t.
Again, make note of the days on the market. This can have a direct bearing on how long it will take before you see an offer. Examine the history of these listings to determine price reductions.
- Square Foot Cost Comparisons:
The buyer’s lender will order an appraisal after you receive an offer, so you’ll want to compare homes with similar square footage to come as close to the eventual appraised value as possible. Appraisers don’t like to deviate more 25%, and they prefer to stay within 10% of net square footage computations.
Comparable homes are those that are 1,800 to 2,200 square feet if your home is 2,000 square feet.
- Market-Dependent Pricing:
The next step after you’ve collected all your data is to analyze that data based on market conditions.
Let’s say that the last three comparable sales in your neighborhood were $250,000. Your sales price might allow some wiggle room for negotiation in a buyer’s market, but you’ll want to be close enough to the last comparable sale to entice a buyer to tour your home. You might need to price your home at $249,900 and settle for $245,000 to sell in this type of market.
Conversely, you might want to add 10% more to the last comparable sale in a seller’s market. You can ask more than the last comparable sale, and you’ll likely get it if there’s little inventory and there are many buyers. That $250,000 home might sell for $265,000 or more.
