A famous little blonde girl of
fairy-tale lore made it look like child’s play to master the art of finding the
‘just-right’ solution to her various lifestyle challenges (e.g., finding a bowl
of porridge, a chair and a bed that suited her fancy).
real-life world of real estate, though, it is much more difficult to find the
‘just-right’ price at which to list your home. There are loads of moving
pieces, competing priorities and voices to be sorted through, internal and
external. Sellers, if you work from a definition of the ‘just-right’ price for
your home as the one at which it will sell without lagging, then it is possible
- necessary, actually - to stop the chaos and start sorting and selecting the
inputs that will get you there.
short(ish) list of those factors:
1. The Comps. If pricing a home was about putting
your heart’s deepest desire on some universal wish list, the world would be a
very different place, my friends. But it’s not. And the first step to buying
your ticket out of fantasy-land and into the realm of the price that will get
your home sold is to narrow down the range of realistic pricing by looking at
‘the comps.’ ‘Comps’ is just industry shorthand for sales data on similar homes
near yours which were recently listed and/or sold (“comparable” listings and
Ask your agent
to provide you with your home’s comps; also, check them out by searching your
address and general area for homes similar to yours, here on Trulia. While you
should view the actual sales prices (vs. list prices) of comps that have
recently closed escrow as very informative and influential for your pricing
decision, the list prices of homes that are lagging on the market can also help
educate you about what price points buyers in your area see as too high.
2. DOM [Days on
The MLS data your agent will provide with the comps and the listings you find
here online should also contain information about how long the various listings
in your market have been on the market. You can use this information - or your
agent do the math for you - to get a gauge on what the average DOM, or Days on
Market, is in your neighborhood.
you to look at the comps with more nuance and to use them more strategically to
influence your own pricing decision; you will ideally want to price your home
in line with properties that went pending and/or sold in a time frame at or
shorter than the average time homes in your area stay on the market. The homes
that have lingered on much longer than that may be overpriced and may even
require a list price reduction to sell; and that’s a club you don’t want to
3. List price
vs. sale price. Here,
LP stands for ‘list price’ and ‘SP’ stands for ‘sale price or ‘sold price.’
This comparison - sometimes expressed in a ratio, other times in terms of how
many percentage points the sale price was over or under the asking price - gets
at the difference, if any, between what sellers are asking for homes in your
area vs. what buyers in your area are willing and able to pay. When homes are
selling for more than the asking price as a pattern or average, this usually
suggests that your market is more of a seller’s market or that multiple offers
are commonplace. And the opposite is true - when homes typically sell for less than
the list price, it indicates that buyers may have superior negotiating power.
Work with your
agent to do the math and to understand its implications for your own pricing
decisions, as they are not always completely obvious. For example, your agent might
be able to point out patterns you don’t automatically see, like the
increasingly common one in which well-staged, vacant homes that are listed at a
slight discount are the ones that typically sell for significantly over asking.
many homes are competing with yours for the hearts, minds and wallets of
qualified buyers? How has the number of competing homes on the market trended
over time, recently? Many areas are reporting a massive decline in competition
- less supply is good for sellers, but you need to know what’s going on in your
area; don’t try to apply national headlines to your local, personal real estate
As you work to
understand competition levels and their impact on your pricing, here’s what not
- Don’t just look up and down the
street, or in your subdivision - also look at similar homes in nearby
neighborhoods or even nearby towns that a buyer who likes what your home
might also target.
- And don’t just look at quantity
- look at the quality, or nature of the competing listings. Is the
competition mostly comprised of ‘regular’ equity sales, short sales or
foreclosures/REOs? If you’re a regular sale in a sea of foreclosures, your
price competition might be steep, but there may be other advantages of your
listing that can offset that, to a degree.
So, what should
you do? Get your agent to help you understand the competition level and the
trends in number of listings on the market in recent months. Then, crash some
of the competing listings’ Open Houses to scope out their condition and collect
the rest of the intel listed
factoring it into your pricing decisions.
5. Timing. If your neighborhood’s award-winning
school district or abundant colleges drive much of the buyer demand, you might
be able to ask or get more for your home in June than in October, once the
school year is in full swing. If you live where it snows, listing it while it’s
easy for buyers to get around might pay off, literally. There are a number of
area-specific timing considerations that you may need to calculate into setting
your just-right list price. Chances are good that you know what they are where
you live, but your agent may have some novel insight on the matter, as well.
How motivated are you? Are you just testing out the market to see if you can
hit a target number, or do you need to have escrow closed by a particular date
to make your life and job plans run smoothly? What is your primary motivation?
Price, timing, closure, making sure your home passes into caring hands or just
getting rid of a home or a mortgage that no longer serves you?
motivated are buyers in your area? From insights like:
- Average number of days on
- Average list price vs. sale
- Trends in comparable sales -
their number and sales prices
- Trends in interest rates
- Trends in competition levels
- And insights like where you are
in the seasonal changes that impact buyers in your area,
you can work
with your listing agent to gauge whether buyers are so motivated that they will
not be deterred by a premium list price, or whether you’ll need to use a
discount or value-based price to churn up motivation in a market of
7. Agent and
So, you came up with a list price that you thought was ‘just-right,’ but you’ve
had little or no Open House traffic or private showings. Or you got lots of
showings, but no offers - or nothing but lowballs, anyway. It’s not too late to
get to the ‘just-right’ list price for your home; in fact, time is of the
essence if you want to take advantage of the swelling levels of buyer interest
and activity that has sprung this Spring.
scenarios where a home lags on the market, the list price was set or maintained
against the express advice of the listing agent, who urged the seller to list
it lower. Or maybe you and your agent agreed on pricing early on, but they’ve
been asking you for a price reduction for months now. If you trust your listing
agent, and they have a strong background for getting homes in your area sold on
today’s market, then it behooves you to at least take their pricing advice
seriously, whether or not you follow it to the letter.
If you need
more data before you make the understandably scary move of cutting your list
price, ask your agent to ask for feedback from the brokers and agents who have
shown the property or attended Open Houses - or even to run the property past
their own colleagues at their office or marketing meetings. Once you have this
input - listen to it and factor it in, along with the other factors.
Tara-Nicholle Nelson | Broker in San Francisco, CA
Urgent Notice to Private HomeSellers.
Know The Facts Before You Sell.
Know The Facts Before You Buy.