Key takeaways
- When selling a home, it’s important to find the right balance between overpricing and underpricing.
- Your home’s list price can influence how buyers view the property and can affect the time it takes to sell.
- Online home-price estimators are useful, but agent-created analyses and professional home appraisals will provide more accurate assessments.
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 choosing the right list price for 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. Here’s how to price your home for sale, whether you want to DIY it or tap into the expertise of listing agents and other pros.
How to price your home for sale
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 estimate the value of your home by taking into account many different criteria and publicly available data, including lot size, how many bedrooms and bathrooms it has and info about recent nearby sales.
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 only factor in your decision.
Agent-created analyses
To get more specific insight into the market and a more complete assessment of your home and its value, work with a local real estate agent. Agents are experts in their local markets who can create a comparative market analysis, or CMA, which is a 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.
Agents also take into account details like how long area 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 local 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 sale price ratio, price per square foot.”
Professional home appraisals
While agents are key evaluators in the local market and the process of pricing a home, the most accurate way to price your home is to get a home appraisal.
A home appraisal is performed by a licensed professional who specializes in this type of assessment. Similar to an agent creating 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 impact 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 — often known as fair market value — 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, or worse, they might just scroll right past the listing without considering it at all.
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 lower price point than they had to. And if you go too low, buyers might assume there’s actually something wrong with the place.
This is where agent expertise really comes into play. “We take great pride in [the fact] that we absolutely know the market,” Pridgett says. Pros know how to take into account any upgrades and additions you have made, and they can also adjust for unique features, like a swimming pool or skylight, that a comp might not be able to factor in.
Be flexible and adjust if necessary
While setting the perfect price is important, don’t be rigid: You have to be flexible and willing to adjust if necessary. Sometimes, market conditions change — think of things that are beyond your control, like a recession or a pandemic, for example — and expectations will shift along with them.
If you’re not happy with where your house is fitting into the local market, there’s always the possibility of selling to an iBuyer or a local cash-homebuying operation. These companies typically purchase properties with the intention of reselling them, and they often make an offer within 24 hours and close the transaction super-quickly, too, which puts money in your pocket faster. But these options typically do not pay top dollar, because they need to make a profit, so you’ll likely do better to exercise some patience.
Bottom line
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’s expertise or an appraiser’s professional assessment. They can help you maximize your investment, and your profit, while also meeting the local market where it is.
