Fri. Sep 29th, 2023
pricing-your-home-to-sell:-let-market-trends-guide-you

Pricing your home to sell is a complex calculation that aims to hit the sweet spot: not so high that you dampen buyer interest and sit on the market for months, and not so low that you undersell its value or inadvertently telegraph there’s a structural problem or other reason it’s priced to move.

That means knowing which features drive value and which factors might not — not exactly crunching numbers. In fact, 31% of sellers HomeLight recently surveyed nationwide said they found it difficult to determine their home’s list price, with 19% overestimating how many offers they would receive for their home.

Agents say sellers often struggle with whether they’ve set the right price, but the housing market’s current state only adds to this confusion. Remember that strong seller’s market where homes sold within a week at full asking price? Conditions have changed. Existing home sales in October dropped 5.9% from the previous month (and 28.4% compared to a year ago), the National Association of Realtors (NAR) says, partly because rising mortgage interest rates (about 6.3% in early December) are squeezing out more potential homebuyers.

That translates to a whole different playing field. In a recent survey of roughly 1,000 top HomeLight network agents, 90% said price reductions are becoming more common, with 89% adding that bidding wars are on the decline and 72% noting that inventory is on the rise.

“We’ve hit a kind of threshold here where sellers aren’t realizing the market has shifted until they’ve actually been in the market. We have a lot of inventory coming onto the market that’s overpriced and not prepared. It’s not staged and painted, and they’re still holding out hope that we’re still in that market from, say, the first and even a little bit of the second quarter of 2022,” says Joseph Arendsen, a top agent in the San Diego and Oceanside, California, areas who sells properties 64% faster than the average agent in those markets.

In this post, we’ve compiled expert insights on pricing your home to sell. Check out our steps below to help set a price that will attract buyers and maximize your resale value.

To Price Your Home, Start With an Online Estimate

Answer a short questionnaire about your home and we’ll provide you with a near-instant estimate of value as a first step.

Start with an instant home value estimate

Detailed property data is widely available online. Sellers now have a head start with the ability to do more preliminary research and access information about their home in an instant, thanks to automated valuation models.

To begin your pricing research, get a quick online home value estimate from a tool like HomeLight’s Home Value Estimator. While it shouldn’t entirely dictate your pricing, an online home value estimate can give you a reasonable price range to begin your work.

Enter your address and answer a few basic questions about your home, and we’ll provide a preliminary home valuation in less than two minutes.

Online valuation tools are only a starting point for pricing your home to sell, though. They won’t give you all the information you need in pricing your home, and they use limited data.

For example, an online tool might compare your property with a home on your street that sold for $50,000 less than it could have.

“Maybe it needed new flooring, there was damage done, it had pets, and it needed a new rug,” says Susan Boyer, a top-selling Utah real estate agent with 13 years of experience. “There are different reasons why an online evaluator is not going to know that, so it might under-price your house.”

While these tools give you a good foundation, your next step should be to connect with a trusted real estate agent who knows every inch of your market. An agent will factor in details that aren’t always measured by these automated tools that may substantially decrease value (or add to it!), such as recent upgrades, water views, a proximity to a high-voltage power line, noise levels, positioning on a steep hill, or general buyer sentiment in the area.

Review the comps provided by your agent

To determine home value, your real estate agent will conduct a comparative market analysis (CMA) that analyzes local comparable sales or “comps.”

Comps are homes similar in size, amenities, structure, and age to your own that recently sold in your area. Real estate professionals and home appraisers use comps as a reference point for the subject home and then make dollar adjustments based on competitive differences. The analysis considers notable features that drive or reduce value.

What makes a house a “comp” for yours?

A home can be a comp if it sold recently, is close by, and has a lot in common with your home. Agents follow some basic guidelines to find the most accurate comparables.

  • It’s in the same ZIP code, ideally within the same neighborhood or within a radius of a mile or two.
  • It’s roughly the same square footage, usually within a 10-20% range of your home.
  • It has the same number of bedrooms and bathrooms.
  • It sold within the last 90 days.
  • It was built around the same time or, ideally, within five years of your home.
  • It’s in the same condition as your home and has similar renovations.
  • It has similar amenities, such as a garage or a pool.
  • The nearby features are similar (i.e., walkability, school district, public transportation).

However, experienced agents also take local market conditions into account. “Prices have come down across pretty much every neighborhood; it’s just depending on which neighborhood has demand,” Arendsen says. While high-demand homes in San Diego’s coastal communities are holding on to their prices, inland areas have seen 11% to 15% price reductions, he says.

“People will look at comps that sold six months ago, and you can’t use those anymore,” he says. To hit the market with a strong asking price, “we’re only looking at properties that have closed within the last two to three months or went into escrow in the last three to four months.” The goal is to eliminate any comps that sold before interest rates started going up or when market conditions were significantly different. “So we want to stay away from those prices and look at what’s happening today,” Arendsen explains.

Why do comps work to price your home?

Overall, comps work because they give you real-world data on how similar homes near you fared in the current market. Analyzing a group of six to 12 comps provides clarity about how your home measures up to the competition in other relevant market trends, such as inventory levels, price per square foot, and average days on market.

With home sale records readily available in many markets online, you may be eager to find comps yourself and make a comparison on your own. But a real estate agent does it more efficiently and with greater detail. They have access to tools like the MLS database that provide more recent sales and details about comparable properties. Not to mention it’s one less task off your plate.

If you aren’t sure where to begin your search for a real estate agent, online agent-matching platforms such as HomeLight make it quick and easy to find great candidates. Tell us a few details about your home and selling timeline, and our platform will analyze over 27 million transactions and thousands of reviews to provide recommendations for up to three top real estate agents with extensive knowledge of your local market.

Watch out for these pricing fallacies

So now you know what goes into pricing your home to sell — but it’s not a foolproof process. Here are some common mistakes to avoid when setting your list price.

You overvalue certain renovations

It may come as a surprise, but not all home renovations have a positive ROI. In fact, Remodeling Magazine reported that the average payback for 22 common professional remodeling projects in 150 major U.S. markets was only about 62% in 2022. That means your renovations likely won’t translate into a dollar-for-dollar increase in home value. So, if your bathroom remodel cost about $27,000, you may see a resale value of just about $16,000.

You put emotions over logic

No matter your reasons for selling, emotions always go into a sale. Your home is a special place, and letting go of it can often be difficult. If there’s sentimental value attached to your property, such as memories of your parents or grandparents, pricing can be especially challenging.

It’s important to let logic supersede emotion when setting your price. Think about it from the buyer’s perspective: Just because the home means a lot to you doesn’t add monetary value to the property. And the right price is your best shot at commanding the value your home deserves.

You neglect to consider eyesores and ‘earsores’

If you’ve lived in your home for some time, you’ve most likely learned to ignore the items that used to bother you. But when setting your price, take some time to look at your home through a clear, objective lens. Are there any noises, blights, or unsightly views that a new homeowner might notice? Maybe there’s a lot of traffic on your street or railroad tracks nearby. Perhaps some power lines block your bedroom view. These negative features could require you to lower your price.

“It’s unfortunate because in the market we were in last year, those homes were still selling,”  Arendsen says. He sold one home that was “literally on an exit ramp” for Interstate 5 in Oceanside for about $20,000 over asking price amid multiple offers.

“In today’s market, those types of homeowners may want to consider holding onto those homes because unless you price that property so significantly under market value, you’re most likely not going to be able to sell it,” he adds. “There are better options out there; there’s some competition and too much hesitation from buyers knowing that the values are coming down and there’s more inventory coming in the future.”

Knowing how to successfully sell a home with eyesores or earsores is another reason it’s wise to partner with a proven real estate agent in a challenging market, or when selling a challenging home. A top agent can show you all the best options to consider.

Give your home credit where due

With all of that said, don’t be too hard on your home. You put a lot of effort into making it a comfortable and pleasant place for your family, so while it’s important to be realistic, give your home praise where it’s warranted.

It’s helpful to have your agent take a quick tour of your home. “We’re someone who knows the area and has feet on the ground,” Boyer says. An experienced agent can see firsthand what specific features might play to your advantage and increase your home’s value.

For example, the size of your yard and its amenities can entice more buyers nowadays. In our survey, 26% of buyers said having their own yard or outdoor space influenced their decision to buy a home in 2022, a perk that goes hand in hand with Americans spending more time at home, thanks largely to the number of remote workers nationwide tripling since 2019.

Some other considerations that may give your home more credit:

  • Recent renovations that increase your home’s value
  • Nearby restaurants or shopping centers
  • A finished basement
  • Larger lot size

“The homes that are in good neighborhoods that are nicely remodeled with today’s standard renovations — maybe a more bohemian style or a modern look versus the nineties and the early 2000s — those homes are selling, and they always will,” Arendsen says.

While 22% of buyers told HomeLight that they wanted a new home so they could decorate and renovate it as they wished, any must-do repairs you’ve let slide can warn buyers away. “A lot of people are still scared to do renovations because they’ve heard horror stories of contractors being backed up, construction prices going through the roof, and materials shortages out there. So that makes it even more important to provide a product that is move-in ready,” Arendsen adds. “We are seeing labor costs come down, and some materials costs coming down, but there’s still a lot of hesitation from your average buyer.”

Don’t forget to show your home at its best. In HomeLight’s Top Agent Insights report for Fall 2022, 86% of agents surveyed said that the pandemic homebuying boom caused sellers to be overconfident and slack on listing preparations. Granted, 31% of sellers told us all the steps required to prepare a house for sale flummoxed them, but only 32% said they deep cleaned the home before listing. What’s more, only about 20% worked on curb appeal and landscaping while 30% decluttered, 25% staged the home, and 25% handled deferred maintenance.

Agents say it time and again: Those seemingly small steps add up to a great impression — and more money on the closing table.

Factor in your selling motivations

Every seller has their own reasons for parting with their home, and the circumstances around every sale are different. Maybe you’re trying to buy a home at the same time, or perhaps you need to hurry your sale in order to move. All of that will factor into your pricing.

If you need to move quickly, it might be beneficial to lower your starting price, so you’re able to attract more aggressive offers, advises Gladys Blum, a top real estate agent in Salem, Oregon, with 45 years of experience. Your agent will go over your timeline and selling motivations in your first meeting.

“I’m going to say, ‘Hey, if you want to sell, what’s more important: time or money?” says Blum, who works with over 67% more single-family homes in Salem than the average agent. “If you want to sell it in 60 days, we need to be below your competition.”

Look for a price range ‘sweet spot’

However, be careful that you’re creating competition instead of fighting it, says Boyer, the Utah real estate agent. That means finding a middle ground — a range that’s not too high, not too low, and not too crowded — instead of trying to emulate your neighbor’s success, especially as the market changes.

The median existing-home sales price in October was $379,100, an increase of 6.6% over the previous year, NAR records show. Let’s say your agent believes your home is worth between $320,000 to $350,000. At the moment, several homes in your neighborhood are priced at $325,000, and several more are priced around $345,000 to $350,000.

Your ideal price might be right in the middle, about $330,000 to $335,000, which is free of other sellers. Even though that may be less than you’re hoping to get, you’re opening yourself up to attractive offers while also showing buyers you’re fair.

“You drive a lot of offers, which creates competition and actually helps you get the high-end price,” Boyer says. “I’ve seen clients come in too high that would’ve gotten that desired number if they had come in at the middle and let the market take over.”

Remember how buyers find homes now: Online

With today’s technology, your home’s first showing isn’t at an open house or on a private tour. It’s online. Nearly 50% percent of recent buyers looked online at properties for sale when starting their home search, and 96% of all buyers used online tools during their home search last year.

So it’s vital to cater your price toward online searches that attract a wide range of potential buyers, says Blum. For example, if you price your home at $302,000, you’re missing out on buyers that capped their search at $300,000 for just an extra $2,000.

“Buyers search for homes in $25,000 increments online,” says Blum. “If you’re aiming for a buyer who will pay $250,000, you need to price it in that category.”

In addition, keep in mind that these online tools are arming buyers with a wealth of information. Boyer says today’s buyers are savvier than ever and attuned to the market. So by the time they come to your open house or set up a showing, they likely already know what the home is worth.

In 2022, 17% of buyers said they thought they’d overpaid for their home, so any potential regrets could stall or torpedo your sale.

We do three weeks on market, and after that, we’re going to have a pretty good idea of where we need to be price-wise. We’re going to have good data points such as how many inquiries did we get, how many showings, and the feedback from those showings that’s going to tell us what we need to do. Typically, that’s a price adjustment, but sometimes it’s not.

  • Joseph Arendsen
    Joseph Arendsen
    Real Estate Agent


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    Joseph Arendsen
    Joseph Arendsen
    Real Estate Agent at True Local Realty Group | COMPASS

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    Currently accepting new clients

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Be ready to make price adjustments as needed

As painful as it may be, sometimes setting a price once isn’t enough. Even if you’ve done your research, your price may not be working in the current conditions. Underestimating how much the market had shifted, 54% of sellers told HomeLight they had reduced their price at least once during the selling process. Data from the NAR shows that while recent sellers typically sold their homes for 100% of the listing price, 38% reported reducing the asking price at least once.

That’s why you must respond to market feedback and adjust your price accordingly, even after your property is listed.

For Boyer, the most important factor she considers when determining if a price reduction is necessary is the average days on the market (DOM) for your area. If the DOM for your location is around 20 days and your property has been listed for nearly 40 days, then your agent probably will suggest you drop your price.

That said, current market conditions might change that timetable. “We do three weeks on market, and after that, we’re going to have a pretty good idea of where we need to be price-wise,” Arendsen says. “We’re going to have good data points such as how many inquiries did we get, how many showings, and the feedback from those showings that’s going to tell us what we need to do. Typically, that’s a price adjustment, but sometimes it’s not.”

Inventory levels are still adjusting in San Diego and Oceanside, with time on market changing from three to five days to up to 45 days, so he and his team look at other factors to make a client’s home the next to sell. “You either have to be in better condition at the same price as your competition or in the same condition at a better price,” he says. “Ultimately, that’s what you need to do to put yourself in a position to sell right now.“

Contrary to popular belief, price reductions aren’t all bad. Blum says she’ll sometimes reduce a list price by $1,000-$2,000 just to get buyer attention.

“If there’s a price change of any kind, whatever buyer has looked at that property online is going to be notified,” she says. “If they looked at it or liked it at all, they’ll be reminded of the home.”

If you’re not open to adjustments, you run the risk of letting your house linger on the market, which could be a red flag for some buyers.

Skip market anxiety and request a cash offer

If your home isn’t getting any offers — no matter the changes you make — or if the process is just too stressful, you have other options.

The most straightforward alternative may be to request a cash offer from an iBuyer (a company that uses pricing technology to make a near-instant offer on your home). Essentially, you provide a few details about your home, the iBuyer names their cash price, and then you decide whether you want to accept or decline the offer.

The advantages of this are that you get a cash offer without the stress of marketing and showing your home, and the uncertainty of a sale falling through. The disadvantages are that you may receive a lower offer than you were hoping for and you might not have much negotiating power to counter.

What’s Your Home’s ‘Simple Sale’ Value?

Skip the home prep and challenge of pricing your home. HomeLight provides cash offers for homes all over the country.

If this route interests you, consider requesting a cash offer from HomeLight’s Simple Sale platform. Rather than do the work of pricing your home and staging it for the market, you will answer a few questions, such as how much work the home needs and how soon you plan to sell, so we can learn a little bit more about your situation.

Within a week, we’ll provide you with a full cash offer with the ability to close in as little as 10 days.

Going this route provides you with a low-stress selling experience that’s much quicker than most transactions that require financing. Instead of debating your selling price or possibly going through multiple price reductions, you could be well on your way to that new neighborhood with the backyard pergola or a spacious two-story with a quiet home office.

Writer Garrett Callahan contributed to this story.

Header Image Source: (Imagenet/ Shutterstock)

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