How you price your home impacts potential buyer interest, directly affecting how long it takes to sell. Learn how to price your home, including where to get data and how to calculate an accurate price point.
This guide also reviews a few common pricing strategies, including the pros and cons of each available option. Finally, it discusses how cash buyers impact a sale and how they can speed up the closing process.
Market Value of a House for Sale
The market value of a house is the estimated price a potential buyer is willing to pay in a competitive and open market. Prices tend to fluctuate based on competing properties and the number of buyers, and additionally, appraisal value and market value might not be the same which could pose some challenges.
Factors Influencing Market Value
Various factors influence market value, including the following:
- Location: The location of a home, specifically the number of buyers in that area, impacts the market value.
- Property Condition: A property’s condition also influences prices. Properties needing many repairs are typically priced lower than those in move-in condition with no needed renovations.
- Comparable Properties: Market value also considers comparable properties, including how quickly they sell and for what price.
- Market Conditions: Market conditions, including current inventory and the frequency of recent sales, also influence a property’s market value.
Pricing Strategies
Various pricing strategies can affect the asking price of a home. A real estate agent might use a few common pricing strategies.
Pricing at Local Market Value
Some agents and sellers may prefer listing a price at local market value, as this provides a good baseline for negotiations. Pricing at local market value is standard in a neutral market, when there are an equal number of sellers and buyers.
Pricing Below Market Value
Some sellers may consider setting a list price below market value to speed up the sale. A list price below market value may also be advised when there are fewer buyers than properties in a buyer’s market. Homes listed below market value may generate more interest and buyer offers, potentially leading to a bidding war.
However, the biggest downside of pricing below market value is that sellers might leave money on the table. A list price more equal to market value may mean the home takes longer to sell, but the final sale price may also not equal what the home is worth. A seller may also price below value due to inaccurate information, such as an outdated appraised value.
Pricing Above Market Value
Setting a list price above market value can deter buyers and usually lead to the home being on the market for longer. Additionally, setting a higher price to lower it later may lead to more buyers submitting low-ball offers. Also, even if a buyer is willing to pay the higher price, they may not be able to obtain financing if the home doesn’t appraise for the asking price.
Sellers may list a home higher than market value in seller’s markets when fewer homes are available than the number of buyers. A hot market may sometimes warrant a higher price, but many buyers may also request more contingencies.
Earning top dollar is the biggest benefit of pricing over value. Pricing higher than market value could lead to a higher selling price if the increased cost is justified.
Conducting a Comparative Market Analysis (CMA)
A comparative market analysis (CMA) is a professional estimate of a home’s value. Your real estate agent may use information from the current housing market to decide on a fair asking price for your home. The assessment uses comparable properties, also called comps, of a similar size with the same features and of roughly the same age.
How to Conduct a CMA
Sellers can also conduct CMAs to determine the best price to list their homes. Complete a CMA with the following steps:
- Collect Important Property Information: Gather information about the property, including size, features, and location.
- Gather Data on Comparable Homes: Review comparable sale properties in the area, including the price range of listed versus sold homes.
- Identify Differences: Identify differences between the other properties. For example, note any differences in curb appeal, square footage, condition, or amenities.
- Calculate Average Price Per Square Footage: Determine the average price per square footage of comparable homes in the same price range as yours.
- Adjust Pricing As Needed: Adjust pricing up or down based on property differences.
- Fairly Price Your Home: Use this information to set the right price. You might also create a price band, which is a lower and upper price range.
Using Online Tools and Resources
Online tools and resources can make creating a CMA easier and more accurate. Use online real estate websites like Zillow, Redfin, and REALTOR.com to review recently sold homes and pricing per square footage.
Automated valuable models (AVMs) are online programs that use mathematical formulas to accurately estimate a home’s fair market value.
However, the most accurate listing prices come from a combination of data points. Reviewing your current market is also the best way to set a competitive price. Sellers can also work with an experienced real estate agent or broker to set a realistic listing price.
Setting the Listing Asking Price
After compiling the data, it’s time to set your home’s selling price. Here are a few important considerations when you price your home.
Reviewing the CMA and Market Data
Reviewing the CMA and market data can provide valuable insights into your home’s best pricing strategy. Original list prices are important when setting prices, as they determine the market your home attracts. Review older listings, considering how long certain properties took to sell, and choose a fair price that benefits both the seller and buyer.
Considering Seller’s Goals and Timeline
The seller’s goals are also a factor when determining the best price point. For example, a seller who wants to sell quickly may need to set a lower price. A seller aiming to maximize profits may have better results with pricing based on market value. Conversely, it’s best not to let an emotional attachment to the property influence pricing.
Consulting with a Real Estate Agent
Real estate agents know the local market and can guide the best and most competitive price range. Experienced listing agents can also help sellers avoid other sellers’ mistakes, such as high pricing or failing to consider a property’s unique features.
Adjusting the Price
Sometimes, price adjustments are necessary, whether due to inaccurate data or an increase/decline in recent sales. Here are a few situations where sellers may need to adjust their prices.
Monitoring Market Activity
Monitoring market activity can help sellers quickly identify market fluctuations requiring price adjustment. For example, a seller’s market that shifts into a buyer’s market may need a lower price point to sell. A specific property may also not receive sufficient interest, and dropping the price can present it to a new range of potential buyers.
Price Reductions and Their Impact
Price reductions can significantly impact active listings. For example, reducing the price of a home can push the property into a new category of buyers. It’s important not to have too high expectations when listing a property, as it may be necessary to re-assess and re-price based on market trends.
Lowering a property’s list price can also decrease related costs, such as closing costs, making it more affordable to a wider range of buyers.
Re-evaluating the Market and Property Condition
If a home continues not selling, it’s crucial to re-assess the market. Many sellers may maintain their prices, leading to a lengthy sale with few potential buyers.
A new selling strategy may be needed if price drops don’t attract more buyers. It may also be worth ordering a new appraisal or hiring an independent appraiser to determine a property’s true value based on the market.
Sellers who avoid century pricing numbers can also reach a larger population of buyers. For example, a home with a specific price point of $400,000 may prevent buyers with a limit of 400K from viewing the property. Setting the price at $399,999 may result in buyers shopping under and over this price point for the home.
The Fastest Way to Sell a House
When speed is a priority when selling a home, a cash home buyer may be the best solution. Cash buyers speed up the closing process by skipping timely appraisals and inspections. A cash buyer sale also usually allows the seller to skip expensive repairs and renovations.
Cash home buyers allow sellers to offload their homes quickly and on their schedules, which is important when selling fast. You can sell your home without the stress of real estate agents, financing contingencies, changing marketing, and ongoing repairs.
Contact A-List Properties at (972) 526-7041 to sell your home for cash. Contact our team using our online form to receive a fast cash offer.
Zach Shelley
Zach Shelley is a seasoned real estate investor with a diverse network spanning across the nation. As the founder of his own real estate venture, Zach is committed to offering innovative solutions to homeowners facing various real estate challenges.. Through his dedication and strategic approach, Zach continues to make a significant impact in the real estate industry, providing homeowners with alternative pathways to navigate their property transactions.
