The single most important factor that determines whether your home sells quickly or not is its list price. Real estate agents create what’s called a Comparative Market Analysis (CMA) to determine what’s an ideal list price for a property. But it is not rocket science. With Zillow.com and Redfin.com, you can easily create your own CMA for most homes. Post that you can sell your home as a For Sale By Owner on Houzeo.com, the most advanced For Sale By Owner (FSBO) platform.
Here are 6 steps to price your home for sale:
Step 1. Start with Zillow’s Zestimate and Redfin’s Price Estimate
Zillow’s Zestimate and Redfin Estimate are both computed daily based on millions of data points. They are both also rather accurate with low median error rates. Start here, and leverage both Zillow and Redfin for the steps below.
Step 2. Review Recently Sold Similar Homes in Your Neighborhood
Use Zillow or Redfin to run your own comps. This step will take about an hour but you will gain a lot from this pricing exercise. Use the general guidelines below to select comparable homes:
- Vicinity: Ensure you search within ½ of a mile to a mile from your home
- Recency: Your comps should have sold within the last 3 months
- Age: Comps should be roughly the same age as your property. If your property is gut-rehabbed, you can use new homes as comps, but discount the price per square foot by about 10% if your home isn’t new
- Square Footage: The comps should have square footage roughly within 15 percent of your property. This means that if your home is 2,400 sq. ft., search for comps within 2,000 to 2,600 sq. ft. Note that in most markets, smaller properties sell for higher price per square foot that larger homes
When you have between 3 to 5 good comps, adjust for the age of each property, lot size, upgrades, and condition. Then compute the price per square foot. Use the median price per square foot from these comps to price your home.
Step 3. Review Current Active Listings in Your Neighborhood
The number you get from steps 1 and 2 needs to be adjusted based on what else is on the market, and whether it is a buyer’s or a seller’s market. So using the same criteria you used to search for sold comps in #2 above, search for current active listings on Zillow and Redfin. You can list your home at the higher end of your range if it is a seller’s market and there aren’t many other options for buyers. Price your home on the lower end if it is a buyer’s market or if there are many other similar homes at comparable price points. You want to be competitively priced to drive traffic to your property.
Step 4. Remember: The Purpose of the LIST PRICE is to DRIVE TRAFFIC
That’s correct. LIST price is NOT the same as the SALE price. Smart sellers will often list their home lower to get traffic to the property and drive up the price with a bidding war. Think about what’s the minimum you can accept, and go with that price. Chances are you’ll get multiple offers if you’ve priced it aggressively – and often the bidding wars will result in a sale price higher than what you had in mind to begin with.
Step 5. Refine the Final Number for Psychology & Online Searches
- Pick a number just below the round number. For example, choose $499,900 instead of $500,000. It’s same psychology why an item priced at $19.95 seems cheaper to a consumer than at $20.00.
- Price your home below common search ranges. For example $499,900 will catch buyers searching for under $500,000 homes, while $505,000 will miss them
Step 6. Reduce Your List Price if it Doesn’t Bring Enough Traffic
Closely monitor your home on Zillow and Redfin. If your listing performance isn’t great compared to the average home in your neighborhood, reduce your price. Make sure though that your reduction is significant enough to bring your property price in line with the market.
According to the Zillow Group Consumer Housing Trends Report, 60 percent of sellers change their price at least once. The key is to recognize quickly that you’ve overpriced, and make an accurate adjustment.
Now you’re ready to roll as a For Sale By Owner! With your home priced competitively, you’re going to be one of the most prepared FSBOs out there!
Keywords: home sale, real estate, flat fee mls, selling a house, comparable sales, national association of realtors, real estate commission, multiple listing service, home improvement, real estate transactions, potential buyer, open houses