How to Price Your Home to Sell (Without Leaving Money on the Table)

As you’re walking through your home with me for a potential listing, what are you looking at? For many, it’s hard not to put a price on memories, thoughts, feelings. But for potential buyers, they’re looking at competing homes.

Here’s what you need to know about pricing.

The initial listing price

The first listing price sets the stage for buyers to find the property through price parameters in searches, price comparisons, and the momentum of the process. Many times, there are buyers actively searching for a home in the neighborhood and at the price. When the home is introduced to the market (that is me!), those buyers will be notified.

If the home is priced correctly, it will be viewed and generate buzz. Buzz includes qualified showings, good feedback from potential buyers and agents, offers, etc. Buzz builds buzz.

Price reductions are necessary from time to time; however, you can’t get back that new-home-on-the-market excitement. And, if the home is priced too high initially, it’s highly likely the home will not make its way to the majority of qualified potential buyers during its most important two weeks.

Condition counts

When considering price, the goal is to price the home at an amount that fits with other sales that are in similar condition. We all know the highest and best home that sold in the area, but that’s not necessarily the best indication of price. Homes with updated kitchens, new roofs, impact windows, great views, and quiet street locations will command more.

Older interiors, an apparent need for repairs, challenging floor plans, and future association special assessments will command less. To a seller, the home is filled with good memories. For a buyer, the focus shifts to the roof, kitchen, bathrooms, appliances, flooring, walls, ceilings, and more.

A few updates and repairs can go a long way toward avoiding buyer-applied discounts. Cleaning, clearing, fixing, and brightening can help your home achieve its highest price point, and you are not going to transform an original kitchen into an updated kitchen, but you can make it show well.

What really sets the price?

When it comes down to it, prices are set by closed sales. Homes that are active are asking prices, which are what sellers hope to receive. Homes that sell for the asking price or above are rare gems.

Homes that are pending tell us that two parties have come to an agreement on price, but until closing, anything can happen. Homes that are closed/sold tell us that two parties came to an agreement on price AND transferred ownership. Appraisers will also need closed sales to back up values.

How to make sense of comparable sales

Square footage does not equal value because one square foot is not always worth the same in any given home/neighborhood. A comprehensive, thoughtful, and defensible comparative market analysis explains the differences between sales. Online calculators are helpful, but they can’t see your kitchen, know if there’s an association special assessment coming up, smell that neighbor’s septic issue, see your great view, etc.

The honest pricing conversation

Some agents will promise the moon to win a listing, but I would rather promise the moon if it’s going to happen than promise something that will cause headaches and heartaches later on. An honest conversation about pricing is critical. It should include financial viability for the seller, because there’s no point in selling if there’s not enough after the sale, but should not include guessing games, negotiation space, and/or disregard for the market.

Ultimately, the goal is a strong sale. That means a price that may not be the highest possible offer but is strong considering all elements.

Seeing the home from both sides

For the seller, a house is the place where life happened. Every room contains some element of sentimentality or pride. For the buyer, a house is what’s visible.

Every room contains some element that speaks of age or wear, needs or flaws. Finding a price that pleases both perspectives is the goal.

What’s the range that both buyers and appraisers will support?

What does your net sheet say you need from the sale?

What can be accomplished to get as close to your needs as possible?

What factors influence offers on homes like yours at this time? A well-prepared seller has an idea of the number they need before offers start arriving. They have a list of repairs, projects, or other contributions they’re willing to make to enhance sale possibilities.

They’ve done the seller net sheet to learn what deductions, such as loan payoff, transactional fees, sales commissions, sales-assisted repairs, buyer credits, and taxes, need to be considered when offers arrive. They’ve taken into account that there are multiple elements, such as purchase price, financial terms, earnest money amount, contingency options, closing dates, and estimated net proceeds, to weigh when reviewing offers, so that the biggest number doesn’t always make the strongest offer.

Choosing the starting price

An important part of the discussion is establishing an honest conversation about the right starting price. It’s a conversation I look forward to. It’s one of those areas where I’ve found it’s best to be upfront and forthright about my belief, then allow you to decide the best course of action for your situation.

The worst-case scenario is a poorly-priced house that needs to have its price revised later. It can result in an unpleasant and hurried discussion. It can leave a house appearing tired and stale.

A strong initial launch can be critical to attracting attention during a home’s first two weeks on the market. It’s helpful to discuss how automated pricing sources work. It’s also helpful to talk through comparable sales, especially how appraisers must rely on comparable sales rather than listings to support opinions of value.

The strongest support for the starting price will include examples of very similar homes that have recently sold. Sometimes a seller wants to add a cushion into the pricing in case offers come in below list price. But adding a cushion can have a couple of negative results:

Buyer searches happen within a range. Adding a cushion pushes the house into a higher price range where buyers will be comparing it to larger/better houses. Appropriate buyers won’t even see it in their search.

Online presentation needs to generate enough interest to earn a house an in-person look. Price is critical to receiving an online view. The actual details of the house need to fulfill online expectations in order to earn an in-person showing.

If the house is competing against larger/better houses, it’s difficult for it to fulfill expectations.

Monitoring the sale and making necessary changes

The next important part of the discussion is agreeing upon next steps. It’s helpful to discuss how houses are monitored, what might occur, and what seller decisions might be needed. Houses will perform in one of three ways: 1) no showings, 2) showings, no offers, 3) offers.

Sellers should be prepared to review comments that repeat certain themes. It’s helpful to discuss how we’ll communicate these themes, whether they’re related to the home’s pricing, its condition, ease of showing, or changes in the marketplace. We’ll also discuss the merits of price changes, noting that one large change that puts the house in a whole new search range is preferable to several smaller changes.

We’ll identify times during the first two-weeks when we’ll meet and discuss web traffic, showing activity, buyer’s agent comments, new listings and recent sales.

Pricing a condo versus a house

Condos are a bit different. Often times the best comparisons are in the same building or stack. Identical floor plans are compared based upon exposure, view, floor and updates. Condo buyers will also take into account upcoming assessments, reserves and rental restrictions in the building as it pertains to price.

With a house I look in the neighborhood for comparisons and then we can compare roofs, pools, lot sizes, impact windows and so on. Flood insurance can affect price more with a house than a condo since the home buyer would be insuring the home directly.

In either case I like to show the sellers not only what comparable properties have sold for but what the asking price was versus the sold price. This helps sellers to get a grasp on what they may have thought their property would sell for versus what buyers are paying and in turn price accordingly for their situation.

When the online estimate is wrong

Occasionally I’ll meet with a seller that has an idea of what they want to get for their home based upon an online estimate. Online estimates can be fun to talk about, but should not be used to determine the price you can get for your home. Those sites do not come look at your home, see the new roof no one told them about, take note of the view or know about the original fixtures still in place. They look at homes that sold (sometimes months ago) not homes that are competing with yours each and every week.

When I meet with a seller we look at comparables together and I can walk them through why each comparable is worth more or less than their home. In the off chance that you still want to ignore the data and list higher than the comparables indicate is warranted, we will discuss what will happen if your desired price point does not bring showings. We’ll have a game plan agreed to before we list the home as to what would have to happen for us to lower the price. I try not to have any surprises and think it’s best to be upfront with each other from day one.

I’ve seen listings overpriced based on emotion sit for months that in the end could have netted more if priced appropriately from day one. Emotion is hard to overcome when a computer tells them what they want to hear. However when we pull some comparables and start talking specifics of the differences in homes, usually the seller will take a look at reality of what someone would actually pay for the home (not what the seller thinks it is worth) and we end up in the ballpark pretty quick.

What a price reduction should look like

If, after making certain that nothing else needs to be addressed (price cuts will not fix poor quality photos), it may be time to cut the price. One single, honest, well planned price reduction will fare much better than three little cuts. Buyers search by pricing tiers; your new price needs to fall into the next tier. Multiple little price cuts will just lead buyers to assume there will be more cuts in their future. And nobody wants to buy something they think is going to keep losing value. The pricing process will go much more smoothly if the plan was determined with the seller before listing.

When implementing the price change, however, re-invigorate the marketing plan, take new photos if something has changed, call the agents who’ve already shown the home, recheck the listing for accuracy, and make sure you’re giving the home another opportunity to shine. An honest pricing strategy keeps buyers from feeling played, keeps some momentum and gives them confidence in the home’s worth.

Preparing to show

In the meantime, the seller will be completing any agreed-upon repair items, organizing a thorough cleaning, and reviewing the final photos and other online information to make sure the best possible items are highlighted. It’s helpful for sellers to review these items and be prepared to offer facts about interesting details that may not be evident from photos and other online information.

Preparing to make decisions

Finally, it’s helpful for sellers to revisit their needs before offers start arriving. What date(s) work best for closing? Is a leaseback a possibility if dates don’t match up?

Are there items that will not be included in the sale? What is the lowest net proceeds amount they’ll consider? These discussions make offers easier to compare and decide upon.

I’ve found it’s best to over-prepare for sale. It’s one of those rare transactions where preparation makes a measurable difference. And it’s one of those times when hiring a professional makes sense.

My goal is not the biggest number when we sit down to discuss pricing. My goal is an honest conversation about pricing so we’ll be successful.