The Art Of Pricing;
How To Come Up With Your List Price

If you’re putting your home on the market you may be tempted to try listing it at a high price “just to see if you can get it.”
Don’t do it.

Pricing your home appropriately from the beginning is critical to getting it sold quickly and at the highest price. Research shows that overpricing your home and then dropping the price several times while it languishes on the market usually leads to selling it at a much lower price than if you priced it correctly to begin with.

Many homeowners want to set their list price based on what they paid for their home, the balance of their mortgage or on the profit they want to make so they can move into another home. If you price your home too high, some potential buyers won’t want to look at it at all, while others will simply walk away without making an offer.

Here’s our company’s philosophy on pricing our listings. We are not giving away any secrets. We stand behind the listed price of any property we have and will gladly share our analysis with any prospective buyer or their Realtor. We are not appraisers. Realtors have to arrive at a value, bring two parties together and close it. Appraisers only have to bless it.

We start virtually every opinion of value by first looking at all of the actual sale prices on surrounding homes. Some Realtors will use “listed prices” to establish values but we don’t even look at them. Listed prices are like a car dealer’s MSRP. Pricing a home should never be what other sellers want for their homes, but what buyers have already paid for homes in the area.

Using the confirmed sale prices of surrounding homes helps us establish a range. If we are asked to price a home in Crestmoor built in 1952 with a pool and 9000 sq ft lot we will go to the MLS and run a search using those parameters.

If five homes come up starting at $250sqft and the highest home selling at $285/sqft, we have a general range to work with. If the seller wants to list his home for $310/sf, we might have a pricing and more importantly, an appraisal problem down the line. Is the seller right in thinking his home will bring substantially more than any other home sale reported to the MLS? He could be, but we have to convince ourselves thatthere is something about that home which makes it substantially more valuable than the others. If we cannot justify the price, we’ll politely pass on the listing opportunity and let another agent take it.

“This is one of the biggest differences between Realtors who just list homes, and Realtors who sell their listings..”

So why not just average the total sale prices of all of the homes in the area? Bad idea! Here’s a hypothetical scenario. Let’s say you are ready to sell a home you bought two years ago for $500,000. It is 5,000 sf in size which means you paid $100/sf for it. Your agent pulls up another home in the neighborhood which just sold for $600,000. That sounds pretty good, but what if that home was 7,000 sf in size? That means it sold for $85.71/sf? Why would you want to compare your home, which you paid $100/sf for, with another home that sold for $85.71/sf? Either you paid too much for your home or the other home is not a good comparable. You have to take the sizes of the comparable homes into consideration when you are trying to establish value. If you don’t make that adjustment, you are probably going to have either a large home which is priced too high or a smaller home which is priced too low.

Keep in mind, when an agent prices your home it all comes down to …

Their experience

Their appreciation of the qualities of your home

Knowledge of the market

The Art of Pricing; How To Come Up with Your List Price | Urban Luxe Real Estate