How To Price Your Home To Sell
You made the big deicsion to sell your home, now your biggest worry is how to make sure you get the most amount of money possible from your sale. Afterall, everything rides on how much money you walk away with. In this article I want to go over all the confusing aspects that may be puzzling you throughout this process. You will be able to easily assess your home’s market value, and how to price your home to sell for top dollar. Best of all, it doesn’t matter where you live, which city you live in, whether your live in San Gabriel or Arcadia, this will be helpful to you. Of course you’ll get some guidance from the realtors you interview for the job, but you’ll want to at least have some starting knowledge so that you’re not relying 100% on a stranger you just met yesterday when it comes to your most valuable asset, your home….
Finding Your Market Value
There is one inescapable truth that you will need to know before you even think about what price to sell your home at, and that’s your home’s market value. Your home’s market value is so important because it helps determine how you will price you home when you list for sale, and more often than naught you will not be pricing your home exactly at it’s market value…
There are 2 main ways to get your home’s estimated market value. Pay for an appraiser, or ask for a free home valuation from a realtor. A licensed appraiser will always have the more accurate appraisal value as they go through strict protocol before obtaining their license. However realtors will have a better idea of the actual housing market, so while the appraiser may technically be more accuracte given the market is a fair market, the realtor can give you specialized pricing opinion as to how much a buyer in today’s market would pay for your home. In most cases it is better to know how much a buyer will pay for your home, than to know what your homes market value would be in a fair market. This is because the market is never fair. No one understands what buyers are thinking and expecting in todays market quite like a realtor. So my best advice if you’re looking for the most accurate estimate of your home’s market value is to speak to 3 realtors and have them all give you a home valuation. Once you’ve gotten all those numbers, find the middle ground or average between the valuations and use that are your starting point. If by this moment you are still unsure about the valuation, you should pay for a professional appraiser to come to the property, and compare the realtor estimates to this appraiser estimate. You can even reach out to the appraiser and show them the valuations other realtors have given you, and see if the appraiser would change his valuation based on these findings.
Understanding Your Home
Now that you have a general idea of what your market value of your home should be when compared to similar properties in the area. It is important for you to understand how your home affects your pricing. Specifically we are looking at the condition of the property as well as any additions or upgrades done to the home, especially important if there have been renovations with no permits.
Your home will generally fall within 3 ranges, poor condition, maintained, and turn key. Poor condition homes are properties with a lot of deferred maitanance and show clear signs of wear and tear, these are typically homes owned by elderly couples who do not upkeep as much as they should be. If your home is poor condition then you may be selling or pricing your home below the estimated market value of your property.
The maintained properties are most likely homes in their original condition with little to no upgrades or renovations, but have been property kept. There are small signs of wear and tear but also regular maintanance when it comes to leaks, issues with the guts of the home, etc. These houses are typically at or slightly below the estimated market value from your previous valuations.
The turnkey properties are often homes that have been newly remodeled or homes that were recently built within the past 10-15 years. These homes do not have any lingering issues with replacing roof, plumbing, or electricals and are move in ready, hence the term turnkey. These are the homes that will often sell above their asking price, typically in the form of a bidding war.
It is important to know that just because you have made upgrades or renovations to your home, doesn’t automatically mean that you home will sell for more or cover the costs of the upgrades. Not all remodels are made the same and inexperienced homeowners may actually waste a lot of money making unneccessary upgrades that do not make their money back. It is also important that all permits that are required are gotten when renovating your home, as unpremitted work may slow down the selling process or cause your home to sell for less.
How to Price Your Home To Sell successfully
Most sellers are aware of 3 ways to price their home, below market value, at market value, and above market value. Here is the thought process behind each of these methods, and afterwards I will give my opinion as to which is the best way to price your home to sell.
Pricing your home above market value is based on the idea of anchoring. Sellers believe that if they price their home high, they know they are overpricing, their real goal is to get a lowball offer so that they can meet somewhere in the middle, which is where the sellers wanted to sell in the first place. The part most sellers overlook however is actually getting buyers to tour the property and offer on their home. They believe that it’s 100% of the realtors responsibility to make this happen, and while it is true, the pricing of the home has a big contributing factor. Homes that are overpriced and are way above market value at first glance are a major turn off for most buyers. Often what happens if a buyer will not even bother with touring the property, let alone submit an offer, simply because they think the seller is asking for too much and it is a waste of their time. The realtor can only do so much as to write a description of the property, get good photos, and show the MLS listing to buyers. This method of selling does work, however it involves a longer sales process followed by multiple price reductions, just until buyers are interested enough to tour.
Pricing your home right at market value is a relatively safe decision. The idea behind this is not to play any games with buyers, the sellers are often expecting a clean offer at the asking price so that they can sell. It’s almost as if the seller is saying ‘take it or leave it’ when they price right at market value. Simple, gets the job done when the market is good, however this method of pricing can face issues if the homeowner is in a down market or a buyers market.
The final way to price your home is by listing under market value. This is by far the scariest thing a homeowner can do, especially if they don’t trust their realtor. The idea behind this is that by listing at an attractive price, the realtor hopes to grab the attention of multiple buyers to tour and offer on the property at the same time, causing a bidding war. This bidding war typically makes the home sell at or above the market value of the home. It is the fastest way to sell a home. The reason why this is underutilized is because it’s scary, most homeowners dread the idea of potentially listing lower than their market value and putting themselves in what they see to be a decision they’ll regret.
The best way to price your home to sell, and to sell for top dollar, is by listing under market value. This method of pricing works in a bad market, a good market, and a fair market. The reason why this method is so effective is because it allows you to see what your highest bid will be and fast. Within weeks you may know what the marketplace is willing to offer for your home, whereas you might spend months trying to find out if you had listed your home higher. It also avoids the issue of not receiving any offers at all, a problem that often occurs when homeowners list above their market value. The best all rounder for any market and any home is to list below market value. You just have to trust your realtor and know they have your best interest in mind, and if you don’t trust your realtor enough to do so, then maybe it’s time to switch lol.
FAQs
How much are closing costs?
There is no set amount to closing costs as a seller, a lot of the closing costs are determined in the initial offer agreement as it will stipulate who pays what. However typical realtor compensation ranges between 4%-6%, and escrow fees are typically between $2k-$3k. Title fees are a percentage of the home sales price, but most likely around 0.1%-0.2%. Ask your realtor for a closing cost net sheet, this is an estimated amount of closing costs you will pay as a seller. It’s also in your best interest to take that net amount and show it to your CPA to get an idea of how much tax you will be paying.
What is a bidding war?
A bidding war occurs when a seller receives multiple offers on their property, this high demand for the home encourages buyers to increase their initial offer in hopes of getting accepted, thus increasing the sales price and resulting in a bidding war. Buyers are bidding against other buyers, almost like an auction.
What is the biggest mistakes sellers make?
The biggest mistake sellers make is listing their home too high. It discourages buyers to put an offer on their property, and worse yet it can result in your home not selling. Once your home is on the market and doesn’t sell it becomes public information, it will be 10x harder to try and sell in the future after this happens. It’s in your best interest to price low, have a bidding war up to the price you want and sell it in the first go.
📍 Final Thoughts from a Local Realtor
I have spoken to hundreds of homeowners looking to sell their home and this is by far the best way to price your home to sell.
Unfortunately realtors have the bad rep of being salesman, and therefore not having their client’s interest first and foremost. The truth of the matter is however the realtor is the professional, we have been through countless listings and deals and have much more experience than you as the homeowner, if you follow our advice, you are more likely to get your home sold!
Have questions about specific neighborhoods, I’d love to help.
