How to Price Your Home – A Simple Exercise
You and your Realtor can set a proper price for your home by completing a simple exercise. Here is the exercise in 4 steps.
Step 1: Review Recent Sales
Review recent sales. Identify all of the listings in your area that have sold over the last several months (your Realtor will provide the listings). Then sort the listings by selling price, from lowest to highest.
Next carefully review all of the detailed listings from the MLS by viewing all of the pictures and all of the features for every home in the list. Try to place your home along the price spectrum within the above list. Where does your home fit along the spectrum when you objectively compare your home to the homes that have recently sold in your area? The answer to this question will provide you with an initial view of your home’s value.
Step 2: Review Current Listings with Accepted Offers
Review current listings with accepted offers. In fast-changing markets prices from several months ago can become old news very quickly. That’s why we also review the listings with accepted offers. We don’t know the contract price for the homes in this list (the contract price is confidential until closing), but we do know each home is priced right to receive an offer for the current market. Your home’s value proposition should be competitive with the homes in this list.
Step 3: Review Current Listings Without Accepted Offers
Review current listings without accepted offers. Once again, rank this list from lowest price to highest price, and try to place your home along the price spectrum by objectively comparing your home to each home in the list. The key thing to remember about these listings is many of them are priced to sit on the market. (Remember, these are the homes that haven’t sold and don’t have accepted offers). Quite a few of the homes in this list will only sell once they undergo one or more price reductions. With this in mind your home needs to stand out as providing a good value compared to the others in the list.
Step 4: Calculate the Months of Inventory in your Neighborhood
Evaluate the supply and demand in your area. Your real estate agent can calculate your neighborhood months of inventory for you. Some neighborhoods with low months of inventory can experience rapid price appreciation. If you live in a subdivision where the demand is high for a limited supply of properties, you and your agent may decide it is appropriate to push the envelope with your pricing and price your home on the leading edge of the market.
Putting it all Together
Once you complete the 4 steps above, you and your Realtor will have a good grasp of your home’s value. Of course there are other factors to consider when you price your home. These include your specific goals and time frame, the time of year, and the type of property you own.
The most challenging part of the pricing exercise is viewing your home through an objective lens. If you are like most sellers, your tendency will be to price your home based on what you want rather than what the market will bear.
With this in mind, we recommend you get out and view the listings in your neighborhood well before you put your home on the market. Track which homes sell and which do not, and track the price for those homes that do sell. How will buyers view your home compared to the others in the neighborhood? Focus on the homes that sell. What price for your home will make your listing competitive with those that sell?
Feel free to get in touch with us for a market evaluation of your home. Please also see our comprehensive selling plan for a list of over 30 different ways we help our clients sell.