How to Price Your Home When You List it For Sale

Many sellers will agonize for hours over how to price their home when they’re getting ready to put it on the market.  Sellers and agents will pour over recently sold comps and analyze other active properties with which they are competing (don’t get me wrong, research is important to making an informed decision, but you have to know the other factors, too.)  The sellers and agents finally settle on a price that “sounds” right, usually ending in “something something, $500,” or “something something $900″.  And for what?  Do they, then, EVER get an offer that equals their asking price?  Not in this market!  Any price you set only guarantees a lower offer, and from that point, sellers and their potential buyer must negotiate to an actual contract price that both will agree on.  So how SHOULD sellers approach the pricing process?

At Crawford Realty, we know that, beyond the house itself, the most important marketing tool you have is your asking price.  Your price must do two things for you:  1.) It must net you a high enough offer to be able to sell for what you absolutely need to get out of it and, 2.) It must land your home in the right ballpark for buyers who are looking to buy a property like yours.  In regard to #1, you, therefore, must know how much you need to walk away with in order to payoff your existing mortgage, pay your commissions and closing costs, and make the profit you absolutely need to be able to move on, buy your next place, and relocate your stuff.  Crawford agents can help you figure out what that number is, but you can probably come pretty close on your own, too.  This, in large part, will determine what your listing price ballpark will be once you add in some reasonable number for negotiating room.   In regard to #2, understand that buyers will search in a minimum to maximum price range, based on what they ultimately plan to pay.  When you price your home to get the maximum marketing exposure, it’s really only important that you get your home in the right range…the right ballpark, so to speak, so that the right potential buyers will see it when they search the range.  They’re going to make you a lower offer anyway, so anywhere in the right range that you can price it will get their visibility. 

Two things sell homes…timing and exposure.  You only need one buyer, so the timing of getting buyer and seller together is critical, but you may have only limited control over that.  Your buyer could be the first person who sees it, or it might take 6 months or more to make the right connection.   You have to ride this one out.  Exposure…now that’s where you can be more proactive.  It’s all about eyeballs on your listing.  The more potential buyers who see it, the more likely you will get an offer.  To that end, if it’s at all possible, we recommend trying to price it EXACTLY ON one of the natural pricing breakpoints that are often choices potential buyers must choose from a dropdown box when they search.  For instance, on many real estate search engines, selections run in $25,000 increments, i.e.; $125,000, $150,000, $175,000, $200,000.  If your house falls in the range (ballpark) Between $125,000-$150,000, you might naturally think of pricing it at $149,900.  Sounds good, like, you know, less than $150,000, right?  Wrong.  Bad mistake.  For the sake of $100, you have cut your internet visibility in half.  Why?  Because $149,900 falls in the $125,000-$150,000 range, and only that range.  But if you price it at $150,000, you double your visibility, and show up to twice as many people because that EXACT number falls in two price ranges.  So now, everyone searching from $125,000 to $175,000 sees you.  You are at the top of the $125,000-$150,000 range and at the bottom of the $150,000-$175,000 range.  Voila!  twice the exposure by merely raising your price $100.  So if the price you need to get is anywhere near one of those natural break points, GET ON THAT NUMBER!  Simple enough.  It amazes me how many agents haven’t figured this out, and you will see it time and time again when you do your own searches.  The ones who miss out most often on this are usually very experienced agents who have run in their markets for years and years but who are not the least bit internet savvy.  Avoid them.  They might be less than up to speed on the other technological changes in the real estate business that dramatically drive the way it’s conducted today.

Now, there is one other big issue to consider, and over time I have looked at both angles on this situation.  I used to feel that a lower price would bring more offers.  So I would advise people to price their property as close to their actual bottom line acceptable number as possible, and then, when they received an offer, just say, “I priced this as low as possible to sell quickly, but I don’t have much (or any) room to negotiate lower, so I have to get my asking price.  Certainly that worked in a seller’s market.  However, this market has done crazy things to people, and, over the last two to three years, it has become VERY important to buyers to be able to get a “deal” on a purchase.  (Witness the number of buyers looking for foreclosures, short sales, and desperate situations to take advantage of.)  For a buyer to be happy with a deal, I’ve increasingly observed that they need to feel like the won a big concession from a seller.  Therefore, it is now imperative to build a good bit of “wiggle room” into your price, so that when you receive a stupidly low offer, you can come down, give the buyer a concession, and still be at or above your minimum number and be able to accept a deal. 

Finally, a few thoughts to clean up this subject:  first, neither I nor any other Realtor(r) on the planet can possibly KNOW the price at which your house will sell, so if anyone tells you they do, show them the door, politely but quickly and firmly.  You must be responsible to determine your asking price, and you must be the one to determine whether or not you can or will accept whatever offers you receive.  There are a lot of considerations, but remember, Right Ballpark, Maximum Exposure, and Enough Wiggle Room to throw the buyer a bone if he wants one.  (Because of Crawford Realty’s reduced commission structure, our sellers automatically have a price advantage over their competition who have listed with a full-price agency:  they are going to save at LEAST 2.5% in commission, and maybe up to 5.5%, so they can negotiate to a lower selling price and still make the proceeds they need.  Sorry for the plug, but you couldn’t expect all this great thinking without getting at least ONE informercial!)  One caveat:  even when buyer and seller agree on a deal, it’s not a deal until the appraiser and the buyer’s loan underwriter agree that the house is worth the purchase price.  If not, the buyer cannot get financing.  Either the deal dies, the buyer has to come up with the difference in more cash, or the seller has to drop the price to the appraised value to get the buyer’s loan funded.