As a homeowner, what better person to select a list price for your home than you? After all, you not only own the real estate, but you also have a stake in its value. However, owning a home and understanding its value in the marketplace are two very different things.
While it can be tempting to choose a listing agent that lists your home at the highest price possible, this plan often backfires. At the end of the day, the list price isn’t the most important number for sellers to pay attention to. Instead, the home’s appraised value and sales price ultimately carry the most weight.
Are you thinking about selling your home? Here’s what you need to know about how listing agents decide a list price for homes.
Don’t Price Your Home Higher to Increase Your Profits
One of the most common mistakes that sellers make is overpricing their home. Listing your home at a higher price won’t necessarily translate to more money come closing day. Instead, you run the risk of your home sitting on the market for longer, which could cause potential buyers to wonder why the property hasn’t sold.
Today’s buyers are more informed than ever before. Thanks to websites and apps like Redfin and Zillow, buyers can see comparable homes in the area. This means that they can quickly determine if your home is overpriced. To get the most money for your home it needs to be priced just right. Listing the home for more than its value will drive buyers away from your listing.
Comparable Home Values Are Important
As a homeowner, you have a biased idea of what your home is worth. Your home is special and maybe you’ve put in a lot of work into it. But at the end of the day, your home’s value is driven by comparable homes (known as comps).
You will want to choose a listing agent that considers such comps and prices your home accordingly. A comparable home is one that has sold in the last 3-6 months and is similar when looking at:
- Approximate square footage
- Number of bedrooms and bathrooms
For example, if a home in your community sold two months ago and is like yours, your home’s list price should be in the same range.
Talk with your listing agent to determine if your home can be listed higher than comps in your area. You may be able to list your home at a higher price if it has:
- A larger lot
- More bedrooms or bathrooms
- Additional features (ie. finished basement or attached garage)
The market competition also plays a role in your home’s list value. If several homes on the market are like yours, you’ll need to consider whether you value time (moving out sooner) or money (selling later for a higher cost).
Don’t Rely on the Internet
Go to one of the top home buying and selling websites and in a matter of seconds, you’ll see a number that claims your house is worth X amount of dollars. While this figure is a good starting point, rarely is this figure correct. In fact, most websites inflate your home’s value, which may give you false hope.
Listing agents use automated valuation models (AVMs) to gather applicable data to determine your home’s value. Your agent will also factor in minor details, such as your home’s positioning, noise levels, proximity to power lines, and so on.
Choose a Listing Agent You Trust
The best way to figure out how much your home is worth is to hire a reputable real estate agent. You want to choose someone very knowledgeable about the area. Your agent should conduct a comparative market analysis to determine your home’s actual value.
Real estate agents consider various factors when pricing a home, including:
- Comparable home sales in the area
- Your home’s appraised value
- A price that attracts buyers
Remember, don’t choose the agent that provides the highest value for your home. Instead, choose one that has experience, knowledge, and works with integrity. Your agent must know the fine line between listing your home at a desirable price for buyers while also getting you the best deal possible.