Just as a football coach has a bunch of different plays to choose from and use throughout a
game, you have a variety of strategies to help you determine the price of your home. No one
strategy can stand alone, but used together they can narrow the best possible price for your
After sizing up the landscape, comparables play the biggest role in setting the price. Considered
part art, part science, "comps" are regarded as the single-best tool in determining a home's value.
There are some tricks determining which comps are the best; see the article on Picking the Best
Comps for help. You can view comps on your property or anyone else's on Zillow.com, simply by
entering an address.
Look at Unsold Homes
Homes on the market that haven't sold yet are also a consideration, although not a strong one,
since it's unproven whether the house will bring the money it's asking. But, look at the active
competition. Find a home most similar to yours and find out how many days it has been on the
market. You can also look for homes owned by celebrities, and benchmark against those houses.
If the house has been sitting for a while (more than 30 days), you will see the market is not
convinced that is the correct price for that home. Once you see the "Sold" sign, find out how much
above or below the list price it sold for. This will give you a good idea of how the market is
behaving and how aggressive you can be in setting a price.
Use Square Foot Pricing
Some neighborhoods are a mixed bag of architecture, style and size, which means if you can't
find another home similar to yours, you can use square foot pricing. How? Take 3 - 5 homes as
similar to yours as possible, add up the square footage and divide by the number of homes. This
will give you an average per square foot for your comps. Then, add up the sold price of each
home, divide by the number of homes to get the average. Lastly, divide the average sold price by
the average square foot to get the average price per square foot. Once you have the average
price per square foot, multiply it by your home's square footage. This is just another tool to help
you price your home.
Step 1: Find the average sq. ft. of comps
Home 1: 1,950 square feet
Home 2: 2,400 square feet
Home 3: 1,800 square feet
Home 4: 2,050 square feet
Total: 8,200 square feet
8,200 / 4 = 2,050 sq. ft.
2,050 is the average sq. ft. of your comps
Step 2: Find the average price of comps
Home 1: $310,000
Home 2: $410,000
Home 3: $299,000
Home 4: $325,000
$1,344,000 / 4 = $336,000
$336,000 is the average price of your comps
Step 3: Divide the average price by the average sq. ft.:
$336,000 / 2,050 = $164/per sq. ft.
$164 is the average price per sq. ft. of your comps
Step 4: Set the price of your home:
Take $164 and multiply it by your square footage to get a price. For example, if you have a 1,975-
square-foot home, multiply it by $164 (e.g., 1,975 sq. ft. x $164 = $323,900).
Bingo! Your home's price: $323,900!
Get a Comparative Market Analysis (CMA)
If you've used the three strategies above, but still need reassurance, go to a real estate agent --
or two or three -- and ask them for a CMA. Whether you use the agent to sell your house or not,
they will be more than willing to provide a CMA in hopes of getting your listing. It shouldn't cost
you any money to get one.
Get an Appraisal
If you really need extra assurance, hire a professional appraiser. An appraiser will cost
approximately $250 - $400, depending on your home size and uniqueness of the property. They
will come to your home and itemize the number of rooms and amenities (e.g. swimming pool,
fireplace, etc.) and will pull comps from other nearby homes that sold recently. Once they have
completed their review of your home, the comps, and the market, they will furnish you with an
appraisal. This will be an estimation of your property's fair market value.
You are anxious to get that sign up, but hold on! Before you set the price on your house, take a look at
what's going on. Not only your perspective of things, but from the current mood of the market. The market
is not sympathetic to "you need" or "must have" pricing methods. The time spent here may save certain
headaches and disappointment that lay ahead if utilizing these strategies in determining your home's
current value. The home is worth what a buyer is willing to pay for it in an open market. So please take
some time and review the following strategies.
What is your Mindset
A seller's biggest advantage is time, because the more time you have, the more you can prepare
and do your homework. However, if you're in a rush to sell, you're at the mercy of the buyer; you
won't have the luxury of preparing or waiting for an ideal one.
Do not disclose your timetable to anyone, except your agent. If you can't trust your agent don't do
business with them. Your agent has a duty of confidentiality to you per your written contract and
will only disclose information you as the seller give permission to disclose. A rushed seller means
a bargain for the buyer and savvy buyers can smell panic a mile away. If you're planning on
selling in the next 6 to 12 months, you have lots of time to prepare.
As odd as it sounds, sometimes people sabotage their own intentions by being too greedy. Don't
do it! As you really start looking at homes on the market, you will develop a sense about what is
priced low, high, or just right. Doing your homework here will help you truly understand home
values and you will be able to set a reasonable price -- a price that buyers know is just right.
Tracking neighborhood values - You need to become somewhat of a snoop because you need to
learn more about your neighborhood than you ever thought possible.
Mood of the Market
Markets have moods? They do! You need to judge whether it's a sellers' market or a buyers'
market and it could vary by city, state, and neighborhood. Your interest is in your own
And when we mention "market", we don't mean the neighborhood grocery store. The market is a
catch-all term for all the ingredients that go into the mood of real estate at a given time. It can
include such things as interest rates, home inventory, job forecasts, and even time of year. The
market shifts constantly, so you need to raise your antennae and tune into what's going on in your
Market Mood Checklist
Inventory. How much is out there? Assess the inventory of homes in your area by driving
around or use online sites to search for sale homes in your neighborhood. Also, real estate
agents send out monthly mailers detailing home sales and include all kinds of information,
such as number of homes that are on the market. If you live in a desirable neighborhood
and there aren't many homes for sale, you will have a clear edge here. However, if you
drive around and do see lots of homes on the market and they're not selling very quickly,
you might have to reduce the price you had in mind.
Days on the market. Review the homes in your neighborhood and their days on market
(DOM). Once again, that real estate mailer that you were throwing away for all those years
will now come in quite handy.
Look up your ZIP code's Zindex on Zillow.com. Look at trends for the past year and assess
whether homes were appreciating or depreciating (e.g. homes in your ZIP code were rising
by 2% each month for the past 6 months). Unless you see a downward tick in this number,
you can probably assume this will continue. If the Zindex in your neighborhood is rising, that
means people are in the buying mood. If the Zindex is on a downturn, that means buyers
have the upper hand.
Check your local news. If Zillow does not provide a Zindex for your home (in which case,
Zillow provides you with a tax assessed value), check your local newspaper's real estate
section for charts or articles on sales trends in your ZIP code.
Jobs, jobs, jobs. Monitor the job situation in your area. Are companies or factories closing
down? Not a good sign. But, if "Major ABC Company" in your local town is expanding, kick
your heels up because that means jobs, more people, and more housing will be required.
This is good.
Track neighborhood values. Each week, walk or drive around your neighborhood and begin
collecting listing sheets -- you know, those fliers that agents create to list the facts and
amenities of a home. It's amazing the knowledge you gain by tracking neighborhood home
values and price points. Ideally, find homes similar to yours and pay close attention to the
"action" surrounding them. Are they getting lots of traffic? As you collect these listing sheets,
put them in a folder and date each sheet. Make note of the list price, sold price, and days on
Attend nearby open houses. This is good for a number of reasons: to observe how other
properties are showing and to assess their value, to chat up the listing agent (they have
loads of info to share), and to feel the "mood" of potential buyers. Once you do this weekly,
you will get an excellent feel for home values and what potential buyers are after. After
doing this for a couple of weeks, challenge yourself by guessing what homes "go for" as you
approach them for the first time. You'll be surprised at how well-trained your eye becomes
with some practice and exposure to homes.
Tour some homes with your agent. Get out there -- act like a buyer and see what they see!
Hear other sellers make mistakes, hover over you, or talk too much or apologize for
Price per square foot. If you don't want to go down on your asking price, you could choose to
focus on your price per square foot. Show potential buyers how your price stacks up against
others in the neighborhood.
Understand first of all that there IS a difference between price and value. Price is the amount you
are asking for the property. Value is buyer perceived, and this perception of value is influenced by
many factors such as location, features, condition, comparison to other purchase option, etc. By
attending to details that can have a positive impact on the value, sellers can significantly increase
their chance of attracting qualified buyers willing to pay the asking price.
Some tips to achieve a positive impact on value are:
1. Perceived size impacts value, even more so than actual square footage. Open floor plans
make a room feel bigger than larger spaces with smaller rooms. Showing property that is furniture
free, or at reduced clutter, helps to make the space feel bigger.
2. Vacancy increases sale-ability. Property is easier to show and easier to sell, and quicker to
take possession of when it is vacant at the time it is offered for sale. Evidence of problems
to take possession of the property -- such as encroachments, or tenants who wont allow
buyer tours -- negatively impact value. Vacancy also helps the buyer walk through the
property imagining ownership. Sellers should remove personal trinkets and family pictures
as well as being conveniently absent during a buyer tour.
3. Cosmetics are important.
Fresh paint will always add more value than it costs.
Clean or new carpet/flooring adds more value than it costs.
Landscaping adds more value than it costs. At the very minimum, make the entrance
If you can, add some colorful flowers and new sod.
4. Take care of the obvious! The spot on the ceiling from the roof leak takes thousands
of dollars from the perceived value and the offer price.
5. Condition affects value. Do a seller's home inspection to identify and fix the problem BEFORE
closing. No point holding up your check a few extra days; plus a failed buyer's inspection
could cost you the sale. Buyers will often bargain down your asking price to accomodate for
property condition and repairs.
6. If you can, remodel/update the kitchen and master bathroom. These two areas have a big
impact on home buying decisions.
7. Strategic renovations impact value and your bottom line. Don't spend more money to renovate
the place than you can recapture in value on the sales price.
Should You Start Out with a HIGH Listing Price?
Because of the change in real estate market conditions, more sellers are
competing for fewer buyers. So once again, it seemed important to
challenge a long-standing "myth" of real estate.
"The initial listing price isn't that important because the price can always
be adjusted down later."
Many homeowners believe this.
It is a myth.
If most buyers first viewed your house because of a newspaper ad, a
magazine, the internet, brochures, or the sign in your front yard, the
initial listing price probably would not make a difference. The house
would always be "new" to those seeing it.
But most buyers do NOT come to your house because of various types of
advertising. That is the another myth.
Sure, buyers call on an ad, they often LOOK at that house, but not
always. Once they talk to an agent, they may discover it isn't what they
need (or want) at all.
However, they ARE talking to an agent. That agent knows the current
inventory and will know of other property that DOES fit their needs.
Those are the properties that buyers look at, and THIS is how most
buyers end up looking at your house, too. Because of other agents, not
because of your ad.
Hardly anyone buys the house in the ad.
As a result, you need to get other agents interested in your property,
and this is where your listing agent comes in...and why a good listing
agent is extremely important. The listing agent gets buyer's agents
looking at your home.
Those agents have clients who called in on other properties.
Buyer's agents are not swayed by advertising. They look at the needs of
the client, where the client wants to live, location, condition, and other
details of the property...
And most importantly....
If your house is overpriced, agents are going to show similar homes that
are priced more attractively. Your listing will get passed over.
Agents pay MOST attention to homes newly on the market. There are
fewer NEW listings than current listings. It is easier to keep an eye out
for what is NEW, compared to the vast number of current listings.
New listings are on the "hot" sheet circulated in real estate offices. The
MLS computer identifies new listings. Your listing agent may hire a
service to distribute fliers to all the buyer's agents. There are office
previews and MLS tours to showcase new listings. A lot of attention is
focused on what is NEW.
With agent's looking at newly listed homes so aggressively, a properly
priced home gets attention.
An overpriced home gets passed over.
You may be thinking, "But I'm willing to negotiate!"
Buyers aren't thinking in advance about how much you are willing to
negotiate. They are comparing your asking price to other asking prices.
Plus, when your house is new on the market, you may not be willing to
negotiate as much as you will later, once you've realized your error.
Keep in mind that statistics show, quite often, the first offer is the best
So what happens if you overprice in the beginning and get more realistic
You don't have all those important Buyer's Agents looking at your listing
because it is NEW. A price reduction later in the listing cycle often gets
overlooked. It is just one of many listings, not one of a few new listings.
As time passes, you could actually become desperate to sell because
you've accepted a new job or because you have already bought a new
That is a recipe for receiving lowball offers, so you could end up selling
for less than if you had priced the home correctly in the first place.
Agents know this stuff, but many sellers still mistakenly believe they
should "price it high" because they can lower the price later, if necessary.
That is not the best strategy.