Pricing Your House for Sale

Ready? If you’ve done your homework, you should be able to take a pretty good stab at setting the price of your home. Let’s walk through the steps in order:

1.    Look at your Zestimate --  Depending on whether you feel your home’s Zestimate is as accurate and up-to-date as possible, use this figure as your starting point.

2.    Tweak your Zestimate with My Estimator -- If you have made improvements to your home that are not reflected in the Zestimate, use the My Estimator tool to refine your Zestimate to get a fairer value.

3.    Use your comps -- With every Zestimate, Zillow offers a set of comparables. Look these over and if you have created a good set of comps, get the average sold price from them. Your asking price should be within 10 percent of the average sold price in your neighborhood.

4.    Find a “magic” price -- Once you have a target in mind, think about prices that motivate people more than others. For example, if you have a target figure of $305,000 in mind, think about setting it at $299,995. This way, you will capture people who do range searching (e.g., $250,000 to $300,000) Also, there’s a proven psychology that items priced just under a “century” number are more attractive to the buyer. Think about shopping in a department store. How many times do you see prices for $9.95, $19.95, and so on? These prices have a psychological “come hither” affect -- they don’t trip those thresholds of $10 or $20.

5.    Find the “soft spot” -- Also called “price banding,” this is the practice of looking over the inventory in your neighborhood and finding the “soft spot.” For example, look at the sale prices of homes in your neighborhood. Prices tend to get bunched up as inventory moves along. Find an empty spot so your home is separated from the pack. For example, four homes are priced in the $274,000-$276,000 range and the next set of homes start around $290,000 and up. You should take advantage of the $280,000 price band.

6.    Consider the non-commission savings -- If you are planning on selling your home on your own, you should take into consideration the savings you will realize by not having to pay a commission. For example, sold prices of homes are generally inflated to absorb the commission rate, which is about 4-6 percent and is usually split four ways (listing agent, listing broker, buy-side agent, and buy-side broker). If you are selling the home yourself, set the price 1-2 percent less than the going average. (Hint: If you do consider selling the house yourself, you might consider paying a buyer’s agent 2-3 percent to bring a buyer. It could cut down on your marketing time and costs.)

7.    Considerations -- Other factors that play into pricing your home:

• Time of year -- Ah, spring. Spring is considered the best season to sell a home since families are trying to get situated before the start of the next school year; however, fall is a close second since it comes right after the quiet days of summer when most people are away on vacation. Winter is usually the worst season -- especially in areas where it snows -- but also because of the Thanksgiving, Christmas, and New Year’s holidays when people’s minds are on socializing, not buying or selling a home.
• Interest rates -- If rates are reasonable, it seems everyone is in the market for a home. But, if interest rates start to climb or they do not seem reasonable, you’ll see less action on the street.
• Inventory -- In Economics 101, we were taught the basics of supply and demand. This theory laid the foundation of what drives costs, and so it goes with real estate. If your home is one of 20 in the neighborhood that’s for sale, you will have a hard time getting your price since the supply is great and the demand may not be so great. However, if it’s a hot market and you have a home in a great neighborhood, chances are you will get your asking price and maybe even more. Scope out the neighborhood to see if inventory is high or low. (And ask a real estate agent.)

8.    Comparative Market Analysis (CMA) ? If you’re working with an agent, you will automatically get a CMA, which includes recent sales and days on the market. Even if you’re not, you should contact three agents and get three CMAs to review. Agents are used to pulling CMAs for folks since they are viewed as potential clients, so don’t be afraid to ask ? you have to get this right! Chances are an agent will not even need to step foot in your house. Once you give them your address, they can create a CMA from the comfort of their office, though they might want to see your house to fine-tune the CMA.

9. Comparative Shopping - Put yourself in the Buyer's shoes and see what else you could get for the asking price of your home.  Often Sellers are too emotionally attached to their homes to objectively place a value on the property.  Once you start looking around to see else is selling for that price, you might have a better idea of how appealing your house is in the current market. 

Next article: Questions to Ask Before Pricing

Previous article: Home Pricing Strategies

Related Links

• Picking the Best Comps
• Home Pricing Strategies
• Real Estate Pricing Checklist

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