5 Factors to Consider Before Deciding on a Listing Price
Determining your home’s listing price is one of the most important steps in the selling process. Not only does the buyer want to get their dream home for the best possible price, the list price for the seller can help the home sell fast or make it sit on the housing market for a little too long.
It’s not a number you should randomly guess at. Instead, you can evaluate several different factors that will help narrow down a price that is fair yet competitive. Here are five things you should keep in mind:
#1: The Closing Costs of Comparable Homes
Sometimes, like in a bidding war scenario, homes will end up selling for a price much higher than the price it was originally listed for. Other times, the buyer might be a really good negotiator and end up getting a price lower than the original listing price. Do your research ahead of time and figure out what other homes comparable to yours actually sold for, rather than only looking at the listing prices.
Comparable homes (also referred to as “comps”) will usually be about the same size, have the same number of bathrooms and bedrooms, and perhaps similar amenities. Compare the original list prices of these homes to their final sale price to see if there were any price reductions. You can then compare this to your own home and adjust the price if necessary for any extra amenities or upgrades in your home or the others.
#2: Listing Prices for Comparable Homes Currently on the Market
Knowing the current listing prices for comparable homes in your area is important because most buyers compare homes and their prices within certain areas, and you want yours to be competitive.
Check to see similar homes that have been listed in your neighborhood or area within the past 3 months, but don’t include homes more than half a mile away unless your home is in a rural area.
You can compare things like the age of your home vs. similar homes nearby and the square footage, but make sure you are not accidentally comparing apples with oranges.
#3: The Location
Location does have an impact on the listing price of a home. For example, homes in quiet, residential neighborhoods will have higher listing prices than homes next to commercial facilities. The town the home is near, the neighborhood it is a part of, and even the spot in the neighborhood can play large roles in determining the listing price.
#4: The Market Condition
What determines a buyer’s or seller’s market is the number of available homes. If there are tons of homes on the market, listing prices tend to be lower because they are all trying to get the attention of a buyer who wants a good deal (hence the name “buyer’s market”). But when the number of available homes is low (also known as a seller’s market), listing prices tend to increase since sellers know that buyer’s will begin to give competitive offers for the homes they want.
Knowing the state of the market you are in (buyer’s or seller’s market) is essential for finding the perfect listing price that is both competitive and fair.
#5: Any Needed Repairs
Listing prices should reflect the number of repairs that a home needs. If a seller’s home needs a few repairs, the listing price should not be the same (or ever similar) to a home that has no needed repairs. Since the buyer will need to pay for those repairs after purchasing the home in order to make it safe, the listing price should generally be reduced by the estimated costs of any repairs that are needed.