Overview
When you prepare to list your home for sale, the biggest questions that seller’s have is what is my home worth?
Determining your listing price is a three-step process. First, you look at recent sales of similar properties to come up with a price range. Then, you analyze additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This will help you settle on a price you think would be fair to list for the home. Finally, depending on your negotiating style, you adjust your “fair” price and come up with what you want to be your listing price.
Comps or Comparable Sales
The first step in determining the price to list it to evaluate sales of similar homes which are also known as comparable sales or comps. Comps are recent sales of homes that compare closely to the one you are looking to purchase. You will compare homes that are similar in square feet, bedrooms, bathrooms, garage, lot size, etc. The ideal situation is to find a recent sale or comp for a property in the builder tract that you are looking to purchase in.
The two main sources for comps are the public record and the multiple listing service (MLS).
Multiple Listing Service (MLS)
Most of the public is aware that the MLS is a private resource where Realtors list properties available for sale. Your agent will have access to the MLS to analyze and pull past sales data to share with you to help in determining the price to list.
Public record
The most accessible source of information on comparable sales is the public record which your agent obtains the data through the title company or access to tax records. When someone buys a home the property is deeded from the seller to the buyer. In most circumstances, this deed is recorded at the local county recorder’s office. They combine sales data with information already known about the property so they can assess property taxes correctly. As long as no additions have been made to the property since last sale, the public record is a good source, however, the information does lag in terms of real-time updates, so the MLS will help to cover this gap.
Pending transactions
The most value for what to list is the most recent sale, however, if there is not substantial data, you Realtor can also reach out to the listing agent if there is a professional reason to gain knowledge on the sales price of an existing home that is pending or under contract but not yet closed.
Property condition
Since you have viewed the property you are interested in, you should know how it compares to the general neighborhood. All you have to do is put the home in one of three categories – below average, average, or above average.
The condition of the home requires evaluating a number of things. First, structural condition is most important such as walls, ceilings, floors, windows, doors, etc. Next, pay close attention to the kitchen and bathrooms in terms of upgrades, plumbing, electrical, and overall condition. Lastly, evaluate other items, including paint, carpets, and floor coverings and outdoors the front and back yard should be in good condition.
Home improvements
When comparing the same model of home in a builder tract, you should identify if the prior owners have made any major improvements. Cosmetic changes such as paint and flooring should generally be ignored unless in terrible condition, however, major improvements such as room additions should be considered. Other items, such as a pool or expensive flooring, should accounted at a discount as a $30,000 pool does not add $30,000 in value.
Market Environment
No one is “know-it-all” when it comes to predicting markets. There are key data points to monitor that indicate when we are in a buyer, seller, or steady market, however, what is hard to predict is when the market will turn the other direction. The data points will start to move, but if they continue to move towards one market or back towards the other is the challenging part.
In a buyer’s market, you don’t have as much latitude in terms of your list price, closing costs, and timing and what concessions you can get from a buyer. In these cases, you may have more room to negotiate depending on activity from other buyers and potential offers.
In a seller’s market, you can be more aggressive in terms of pricing, closing costs, and adjusting timing to align with the your needs. All of these items are negotiable, however, as a seller you should never trade the key contingencies that protect you.
At the end of the day, know the current market environment and what it will take to attract the most amount of competition for your home.
Final decision on listing price
The final decision of listing price lies in your hands as the seller, what you are comfortable with, your negotiation style and taking into account the above factors. Be thoughtful, realistic and know what you are willing to live with based on your needs to sale.