When I meet with clients both new and ones that have listed with another agent and have cancelled their listing with them and hired me to help them sell their home, one of the most important pieces that ensures the success of their listing is coming up with an accurate list price. I can’t tell you how many times I’ve been baffled at the list price of a home. So how do we determine a list price?
Before I go out to meet with my clients, what I do is I pull some reports from the Multiple Listing Service and they are what's called comparables. So what I'm going to do is run some reports and see what has sold in your neighborhood in the last six months in your home’s square footage range and age range.
Assuming there's enough data showing what’s currently active, under contract and sold, I can get a really good idea of what your home's value is on paper. And then when I come out to meet with you, we'll nail down those details with your condition, finish out, and any other structural things you may have like a three car garage, pool, corner lot, backing up to a golf course, anything like that.
The way I come up with a list price is looking at all those factors. Part of the process frankly, is also using my experience. I’ve listed hundreds of homes in my career and you learn by doing as well as by understanding the market. I can't tell you how many times I've met with a client and they've canceled their listing with another agent and I'm like, “okay, first of all, just tell me how did you get to this list price that you guys were at?” Almost every time they say something like “ Oh, I just told the agent the price I wanted to list my home for and they just did it.” Or they say something like “I needed to get $50,000 out of my home and at that price I would net that.”
I educate my clients on the fact that the home buyers in the market dictate what they will pay for a home NOT the sellers, and unfortunately, we can't price homes on what sellers need to get out of it or what they think they should get. We have to look at the data in the area, then we have to look at the current market trends, and apply the data of the home to come up with a list price
I tell my clients that I am not necessarily going to tell them what they want to hear, and while it may hurt, they can rest assured that I will always be honest with them about the value of their home so they are going into the process of listing their home eyes wide open. It’s not fair to my clients to tell them what they want to hear if I know the market won’t bear the price they feel they need or want to get.
In addition to ensuring we aren’t overpricing and turning off buyers, our list and sale price will need to be in line from a comparable standpoint because assuming the buyer is securing a loan for the home when they purchase, there will be an appraisal done on the home. An appraisal is when an appraiser comes out when a buyer securing a loan and they basically assess the value of the home and report back to the lender to ensure the lender is not loaning the buyer too much money. They are a third party that does not work for the buyer or the lender so it’s a neutral third party.
So how does the appraiser assess value? They are going to pull some comparables (sound familiar?) similar to what I pulled for the listing appointment and they're going to compare your home to what has sold and closed over the past 6 months in your immediate area and they're going to come up with a value. That’s another reason it’s important to be in line with list price because generally speaking if the home is overpriced it’s going to sit on the market and in the event we do get a buyer at the higher price, we need to be aware of potential appraisal issues that may come up weeks down the road and have a strategy in place if necessary.
There are various pricing strategies you can apply when listing a home and a lot of it's going to be dependent on your particular sub market, what's going on as far as inventory levels, days on market, your goals, what you're trying to accomplish, etc and we will discuss all of that when we meet for the listing appointment.
Before I leave a listing appointment I review the net sheet with my clients and we look at what they can expect to net on their home at the recommended list price so we are all on the same page before we even secure the listing.
Most of the time even if the value I recommend is lower than the list price they were thinking before we met for the listing appointment I am able to show my clients how to price and sell their home where the market will respond while still accomplishing their goals to move on to the next chapter in their lives. There are many options out there and my clients aren’t always aware of so rest assured that even if the number doesn’t match what you had in mind, I can also help you structure things to still get to where you want to go.
Especially if I’m having a tough conversation where I’m letting a client know that they likely won’t get what they want or need out of their home, I share with them that I have every incentive to tell them what they want to hear to get a for sale sign in their yard, but that's not fair to them as a seller if we can't get that number they need/want on their home to put them and their family through that exercise in futility. I let them know that my reputation with my clients is too important to me to just tell people what they want to hear and have an unsuccessful listing.
For more home selling resources head to this page for more home selling tips and let me know if you have a real estate question you want featured!
Leave a Reply