The vast majority of homes sold in the U.S. are sold through local real estate MLS (Multiple Listing Service) systems. The member real estate brokers and agents list their properties and cooperate with other members in the sales through commission sharing. The typical seller will shop for a real estate company and agent, maybe interviewing several.
Every seller has their own priorities for that choice, but the most important common concern should be listing the home at the right price. Here are what I consider the top five things to understand about pricing your home to sell and not sit on the market.
#5 Value is Relative but there’s a Limit
You’re going to have your own ideas about what your home should sell for, but emotion only clouds the picture. It doesn’t matter how much you love your home, or how much money and sweat you’ve invested in it. There isn’t an absolute hard number though, as there are nuances in every market. Every potential buyer will have their own unique situation and a top price they’ll pay for your home. It’s a mistake to assume you’ll stumble into the perfect prospect who will fall in love with the home and pay over market.
There are fast, slow and balanced markets. Sellers can be more aggressive if buyers are competing in a low inventory situation. Your home may also have certain features that are in demand, such as a large open gourmet kitchen. But, if every home in the neighborhood does as well, then you lose the competitive advantage. The point is to work with the listing agent to thoroughly evaluate your home based on more than just what others have sold for recently.
#4 DOM Can Burn You
That’s Days-On-Market. Testing the market with a price higher than a careful valuation tells you it’s worth is risky. Sure, if it’s a healthy market you may get that just-right buyer the first week or so. But, if you don’t, buyers are checking out the number of days your home has been for sale and maybe adjusting their offers downward. Don’t assume that DOM doesn’t matter.
#3 Leave Room for Negotiations
Sure, we all know that it’s unlikely that we’ll get a full price offer right out of the gate. We expect some back-and-forth, and the listing price should have some room built into it for this bargaining process. But, too many sellers forget that there is another bargaining process after inspections. The perfect home doesn’t exist, and home inspections turn up condition issues and repair recommendations.
Minor stuff usually doesn’t result in a new round of negotiating, but buyers can be very demanding, especially if they paid near asking price. If you’ve been aggressive and held the line for a full price or near full price contract, expect some pushback if there are condition problems.
#2 Know How Your Agent Chose the Comparables
Real estate agents do a CMA, Comparative (Competitive) Market Analysis. They choose a number of homes similar to yours that have sold recently and use their selling prices to value your home in the current market. They adjust those sold prices to compensate for differences in the properties, such as number of bedrooms, etc.
Three very important things they consider in choosing those comparables (comps) are similarity to your home, when they sold and location. They should be using very recent sales, try to stay in the same neighborhood, and use homes as close to the same in features and size as yours. Ask your agent the reasons for choosing the comps they did, and how many possible choices there were. It may not be intentional, but in competing for a listing, an agent wants to give you a good list price estimate to get the listing. They can lean toward the comps with the highest sold prices, even if there were more qualified recent sales.
#1 Do it all Again
If your home doesn’t go under contract very quickly, how long is that original list price the right one for the market? It depends on the market, but in all of them homes are being added and sold almost daily. Supply and demand is the driver of prices, and supply can rise or fall quickly. Have a clear understanding with your agent that you want a report of market activity every couple of weeks. If home inventories change a lot, you’ll want to do another CMA.
Another thing that can make a big difference very quickly involves the type of homes and features. Inventory levels can stay pretty steady, but if three bedroom homes flood the market suddenly, yours may need a price adjustment.
Now you’re well-informed about price influences and the process. Keep these in mind for a better relationship with your agent and a smoother sale process.