Setting Your List Price

Setting the list price for your home involves evaluating various market conditions and financial factors.

During this phase of the home selling process, your REALTOR® will help you set your list price based on:

  • Pricing considerations
  • Comparable sales
  • Market conditions
  • Offering incentives
  • Estimating net proceeds

Pricing considerations

In setting the list price for your home, you should be aware of a buyer's frame of mind. Consider the following pricing factors: If you set the price too high, your house won’t be picked for viewing, even though it may be much nicer than other homes on the street. You may have told your REALTOR® to "Bring me any offer. Frankly, I'd take less." But compared to other houses for sale, your home simply looks too expensive to be considered. If you price too low, you'll short-change yourself. Your house will sell promptly, yes, but you may make less on the sale than if you had set a higher price and waited for a buyer who was willing to pay it.

Using comparable sales

No matter how attractive and polished your house, buyers will be comparing its price with everything else on the market. Your REALTOR® can furnish data on sales figures for those "comps", and analyze them for a suggested listing price. The decision about how much to ask, though, is always yours.

Consider market conditions

A Comparative Market Analysis (CMA) often includes Days on the Market (DOM) for each comparable house sold. When real estate is booming and prices are rising, houses may sell in a few days. Conversely, when the market slows down, average DOM can run into many months. Your REALTOR® can tell you whether your area is currently a buyer's market or a seller's market. In a seller's market, you can price a bit beyond what you really expect, just to see what the reaction will be. In a buyer's market, if you really need to sell promptly, offer an attractive bargain price.

Offering incentives

Some sellers list at the rock-bottom price they'd really take, because they hate bargaining. Others add on thousands to the estimated market value "just to see what happens." If you want to try that, and if you have the luxury of enough time to feel out the market, sit down with your REALTOR® and work out a schedule in advance. If there haven't been many prospects viewing your home after three weeks, you may need to lower your list price. If that doesn't bring any prospective buyers, you may need to lower your list price again. Plan on doing that regularly until you find a level that attracts buyers. Make a written schedule in advance, before emotion takes over and you're tempted to dig your heels in.

Sometimes cash incentives are as effective as lowering the price, especially in the lower price range where buyers may be "cash poor." You may offer to pay some or all of a buyer's closing costs and discount points required by the buyer's lending institution. If you haven't had much traffic through your house and you’re in a hurry to sell, you may want to add the offer of a bonus to the selling broker, in addition to their commission.

Estimating net proceeds

Once you’ve been given an estimate of market value by your REALTOR®, you can get a rough idea of how much cash you might walk away with when the sale is completed. This can be particularly useful as you start looking for another home to buy. From the estimated sales price, subtract:

  • Payoff figure on your present loan(s)
  • Broker's commission
  • Any prepayment penalty on your mortgage
  • Attorney's fees, if any
  • Unpaid property taxes

In addition, your REALTOR® can tell you whether local customs or rules dictate that the buyer or seller to pay for the following items:

  • Title insurance premium
  • Transfer taxes
  • Survey fees
  • Inspections and repairs for termites and the like
  • Recording fees
  • Homeowner Association transfer fees and document preparation
  • Home protection plan
  • Natural hazard disclosure report

As far as closing costs are concerned, you and your eventual buyer may agree on any arrangement that suits you, no matter what local practice dictates. Your REALTOR® will assist you in estimating what your final closing costs will be.