Selling Step 3: Set the Listing Price
All owners want the best possible price and terms when selling their
home. Several factors, including market conditions and interest rates,
will determine how much you can get for your home. The idea is to get
the maximum price and the best terms during the window of time when your
home is on the market.
In other words, home selling is part science, part marketing, part
negotiation and part art. Unlike math where 2 + 2 always equals 4, in
real estate there is no certain conclusion. All transactions are
different, and because of this, you should do as much as possible to
prepare your home for sale and engage the REALTOR® you feel is best able to sell your home.
What is Your Home Worth?
What homes are worth boils down to “what the market says it’s worth.”
A home “value” also depends on who you ask: there's the price owners
would like to get, the price buyers would like to offer and the point of
agreement between buyer and seller that actually results in a sale.
In considering home values, several factors are important:
- The value of your home relates to local sale prices. The same home located elsewhere could have a different value.
- Sale prices are a product of supply and demand.
If you live in a community with an expanding job base, a growing
population and a limited housing supply, you have a seller’s market, and
home prices will likely rise. Alternatively, if the local community is
losing jobs and people are moving out, then you'll likely have a buyer's
- Listing prices should not be inflated. You
should be strategic in setting your listing price and be sure not to
overprice your home, because you may not be able to sell it. The longer a
home is on the market, the more “stale” it gets, and the more likely
that buyer agents will tend not to show it and that buyers will think
there is something wrong with the home because it is not selling. If you
overpriced your home, you many eventually have to bring the price down
to even less than what you could’ve got if it was priced properly in the
first place. And you will have lost the initial flurry of interest that
new listings generate.
- How quickly the owner needs to sell can affect sale values.
Owners who " must" sell quickly will have less leverage in the
marketplace. Buyers may think that the owner is willing to trade a quick
closing for a lower price - and they may be right. Conversely, owners
who do not need to sell quickly may have more marketplace strength.
- Sale prices are not based on what owners " need."
When an owner says, " I must sell for $300,000 because I need $100,000
in cash to buy my next home," buyers will quickly ask if $300,000 is a
reasonable price for the property. If similar homes in the same
community are selling for $250,000, the seller will not be able to sell
- Sale prices are NOT the whole deal; look also at terms and conditions.
Which would you rather have: a sale price of $200,000, or a sale price
of $205,000 but where you agree to make a " seller contribution" of
$5,000 to offset the buyer's closing costs, pay a $2,000 allowance for
roof repairs, fund two mortgage points, repaint the entire house and
leave the washer and dryer?
How Do You Set a Listing Price?
Because all transactions are unique there is price flexibility in the
marketplace. The amount of flexibility depends on local conditions.
For example: you're selling a townhouse and there have been five
recent sales of the same model townhouse and prices ranged from $200,000
to $210,000. You now have an idea of how your home might be priced. In a
strong market perhaps you can ask for $210,000 or a little more. If the
market has slowed, $210,000 may be a reasonable asking price, but
perhaps more than you could get for a final sale price.
Here's another scenario: you live in a community of Victorian-style
homes, most of which were built in the 1920s. All the homes are
different in terms of size, condition, modernization, style and
features. In such a neighborhood, an average sale price is just a
statistic without much practical meaning. On a single block one home may
sell for $400,000 while another is priced at more than $1 million. The
average price may be outrageously high for one home and staggeringly low
Knowing what listing price to set for your home can be difficult. That is why it is valuable to work with a REALTOR®. Because experienced REALTORS®
have handled many transactions, they're familiar with the terms and
conditions that went into individual sales, not just published sale
prices that may not reflect various premiums, discounts, terms,
conditions and adjustments. And, importantly, REALTORS® know of the latest sale prices among competing houses and can offer that information to the home seller.