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Selling your home is a big deal. It was a major investment when you bought it, and you want to maximize the asset as much as you can. There are a lot of factors to consider when pricing your home, though. Sure, you’d like to get as much money as possible, but if you overprice it you risk seeing the home sit on the market with no offers. On the other hand, if you price it too low, you might end up with low offers that don’t meet your needs.
Finding the sweet spot is a process, but it can be achieved with some research and legwork. Whether you want to come up with a price on your own or tap into the expertise of agents and other experts, here’s how to find the perfect asking price for your home.
How to price your home
There are a number of tools available to help determine how much your house is worth, from automated online systems to experts who can provide essential insight into the local market. Here are three methods that can ease the process of figuring out what dollar amount to put on your home.
Automated valuation models
When preparing to sell your home, online home-value estimators can give you a basic ballpark idea of how much your home is worth. The most common version of this tool is an automated valuation model, otherwise known as an AVM. These online algorithms — like Zillow’s “Zestimate” — predict the value of your home by taking into account many different conditions, including how many bedrooms and bathrooms it has and how big the property is. They often incorporate details about recent nearby sales and more as well, to produce an overall price.
It’s worth noting that while AVMs are useful tools, they are far from perfect. Algorithms don’t know all of the details about your home, including its condition. In addition, every algorithm is different, which means different AVMs can produce wildly different estimates. Consulting an AVM is a good start, but it should not be the final factor in your decision to price your home.
Agent-created ‘comparative market analyses’
To get more specific insight into the market and a more complete assessment of your home and its value, it is best to work with a local real estate agent. Agents are experts who can create a comparative market analysis, or CMA, which is a much more thorough, insightful and hyper-local estimate than an AVM can provide.
“One of the biggest reasons buyers and sellers should work with a real estate professional is their local knowledge,” says Eugene Pridgett, broker/owner at Century 21’s Gene Group in Centerville, Ohio.
According to Pridgett, agents often use pricing bands based on location and other factors to help establish a baseline for how much a seller can expect to get for their home. “A buyer in a given price band is usually comfortable enough to purchase from both ends of the bracket, but tends to get uncomfortable moving to the next bracket,” he says. “So with the rules of conformity in place, the homes fit and are comparable.”
Agents also take into account details like how long homes have been sitting on the market, price fluctuations and other factors that could serve as indicators of overall market health. This includes looking at comps, or other recent sales of similar homes.
“As professional real estate practitioners, we know what makes sense,” Pridgett says of everything an agent’s CMA will factor in. “I refer to ‘where the rubber meets the road’: the number of homes sold, average days on the market, average sale price of sold homes, list price to sales price ratio, and price per square foot.”
Professional home appraisals
While agents are key evaluators in the local market and the process of pricing a home, to get the most accurate number in terms of financing, a home appraisal is essential.
A home appraisal is performed by a licensed professional who specializes in this type of assessment. Similar to an agent performing a CMA, a home appraiser will consider factors like recent sales of comparable homes as well as details about your home and its location. An appraiser will also perform an in-person walk-through of your home to consider upgrades, additions and other changes you have made to the home that might increase its value.
Appraisers are independent and provide an objective analysis of your home’s value. Typically a home appraisal is performed by the buyer’s lender after a contract has been signed, to ensure that the home is worth the sale price. Lenders don’t want to loan more than the appraised value of a home. But a seller can hire an appraiser anytime as well.
Why the perfect price matters
While you might think that the price of your home will be primarily dictated by how much someone is willing to pay, establishing an asking price is key. It’s the starting point that influences how people view the property. If you overvalue it, people may be afraid or unwilling to place a bid because they don’t want to pay too much. This can result in you waiting longer than expected to sell your home, which can cause complications if you are also buying another home at around the same time.
Likewise, you don’t want to underestimate the value of your home, either. No seller wants to leave money on the table by choosing a low price point. And if you go too low, buyers might assume there’s something wrong with the place.
This is where agent expertise really comes in. “We take great pride in telling our clients that we absolutely know the market,” Pridgett says. Pros know how to take into account the upgrades and additions you have made, and they can also adjust for unique features, like a swimming pool or skylight, that a comp can’t fully factor in. Depending on the competitiveness of your local market, a savvy agent may even suggest slightly underpricing in order to spark a bidding war.
Adjust when necessary
While setting the perfect price is important, you shouldn’t feel so attached to that number that you are unwilling to adjust if necessary. Sometimes, due to circumstances beyond your control — like a possible recession, for example — the conditions of the market change, and expectations shift along with them.
If you’re not happy with the price you think your home might fetch on the open market, there’s always the possibility of selling to an iBuyer. These tech-based homebuying companies purchase properties with the intention of reselling them, and they often make an offer in 24 hours or less. But while they are great for selling your home quickly, they are typically not paying top dollar, because they need to make a profit.
There are a number of online tools that can help you come up with a ballpark asking price for your home. But you will be best served by taking advantage of an agent or appraiser’s expertise. They can help you maximize your investment, and your profit, while also meeting the local market where it is.