The asking price you first set is a big number. It can attract buyers. It can repel buyers. It can be viewed as a starting point or an ending point.
One thing's for sure: It's one of the biggest decisions in the selling process. Here's how to price your house for the best results.
For more about pricing your home to sell, please visit our comprehensive Pricing Guide.
1.Think Like A Buyer
The first step is to think like the people whom you hope will buy your house. What do they see when they look at your house? How does your house compare to similar houses that have recently sold, and that are currently for sale, in your neighborhood?
First, define your neighborhood the way a buyer would. Do expect a buyer to look for houses in particular subdivisions? By zip code? By access to public transit? By school district? Draw up a list of characteristics that you believe are most compelling to buyers.
Next, using those characteristics, compile a list of houses similar to your in size, style, condition and amenities that have recently sold, and that are currently for sale.
Find lists of recently sold houses by searching property tax and title transfer records for your municipality and county. (If you are not sure where to start, try the county recorder of deeds. Many records are online, but you might have to go to the clerk's office and make copies.) You can get some of this information from the "Recently Sold" tabs of Zillow and Realtor.com. These sites draw their data from MLS submissions and from public records. There is always a lag time, so you can get the latest data yourself directly from the clerk's offices.
Find houses currently on the market by looking at listings at Realtor.com, ForSaleByOwner.com, Craigslist, and other listing services. Pinpoint those that you believe are, objectively, most similar to yours. These houses are your active competition.
Now, calculate the price per square foot for the sold houses and for the active competition. What is the difference? What seems to justify it?
Come up with a narrow range of prices per square foot and calculate the asking price of your house for several price points. Which seems best aligned with market trends in your area?
2. Understand the Active Competition
You need to know exactly what you are up against. Get the listing sheets for the houses on the market in your neighborhood. Typically, these are readily available through Realtor.com, Trulia and other listing services.
Using the sample listing sheet at ForSaleByOwner.com, compare the characteristics of your house to that of the active competition. Find out:
• Total number of rooms; whether or not finished basement rooms count is a matter of local tradition.
• Bedrooms — how many and how large?
• Bathrooms — how many, and does the master bedroom have its own bathroom?
• Kitchen — what is the size and condition? Is the kitchen recently renovated? Are the appliances less than two years old?
• Garage — is it attached? Detached?
• Mechanicals — is there central air? New or recently updated heating, plumbing and electric? Is it energy efficiency?
• Amenities — find out about if there are features like fireplaces, porches, sun rooms, pools, finished playrooms, walk-in closets, pools, hot tubs, perennial gardens, etc.
• Regional preferences; for example, in some regions, woodburning fireplaces are much more popular, and thus, more sellable, than gas fireplaces. In some cities, condos with split floor plans (bedrooms on either side of the main living area) are the preferred floor plan. Presumably you have become conversant in regional preferences by living in your area. Use that knowledge to emphasize the characteristics of your house that are most popular with homeowners in your area.
3. Visit Open Houses
Gather details about the size, condition and amenities of the active competition. You'll also want to see how "professional" agents market the houses. You'll pick up a few good ideas, and a long list of tactics to avoid.
4. Get an Automated Valuation Report or Appraisal
What's the difference?
• Automated Valuation Reports, such as those available through ForSaleByOwner.com, estimate the value of your house based on recent sales, on data you enter about the size and condition of the house. These variables are run through a computer algorithm. That's why these reports are estimates. They are useful, but they are not conclusive.
• An appraiser is licensed by your state to analyze the value of a piece of property, from real estate to jewelry. Using several types of pricing models, and after visiting your house to see for herself its size, style, condition and amenities, the appraiser will come up with a current value. This will cost several hundred dollars, but is the most solid piece of evidence you will have for setting and sticking to your price. Buyers expect to negotiate hard. An appraisal can pay for itself many times over if it helps you set the right price to begin with.
5. Research Market Trends
One of the biggest mistakes sellers are doing in today's market is pricing their home at price points of one, two or three years ago. Houses sell in a buyer's market when they are priced just a little under the most recent sale price for similar homes. This anticipates the price that buyers expect and is likely to draw them into a conversation and an offer. Another market metric to understand is "days on market." This is the average number of days it takes for an agent to sell a house. Typically, "days on market" is part of local news reports and agents' association press releases about local market trends. Knowing the "days on market" will help you adjust your own expectations accordingly: Do you have to be ready to scram, or is this likely to be long haul?
6. Take Advantage of Selling by Owner
Owners of homes being sold through a real estate agent will have to fork over expensive commission fees equal to 5-6% of their home's sale price (or $18,000 for a $300,000 home). Or, in other words, the seller of that $300,000 home will only "pocket" $282,000. As a smart "for sale by owner" home seller, you won't have that expense and — depending on how quickly you want to sell — you'll have the unique ability to price your home anywhere in that $282,000-$300,000 range and still come out ahead financially compared to sellers of similar homes. You'll also be able to get more buyers as well because they'll be attracted to your home's asking price.
7. Set the Price
Once you have the data, set the asking price and move on to the next phase of selling: marketing.