Putting a price tag on a home you're trying to sell is a tricky thing. For one, it's your home, crammed full of memories, hopes, and dreams -- and all that stuff can cloud your thinking and lead you toward the wrong price. There are consequences: Shoot too high, and your home could languish on the market for months and maybe not sell at all. Price it too low and you could bilk yourself out of a whole lot of dough.
That's why we're here to guide you through this tough but critical decision (and all the others you'll have to make) with our step-by-step weekly Home-Selling Guide. Read on to pinpoint a price that's just right.
Repeat after us: What you paid doesn't matter
You may have a dollar figure in mind -- perhaps based on what you paid originally, plus a little extra. Because homes appreciate, right? Maybe yes, maybe no. While a hefty increase in value is nice in theory -- and in general, it's expected to be a seller's market this year -- "ultimately, it's up to the market," says Chandler Crouch, broker of Chandler Crouch Realtors in Fort Worth, TX.
Think of it this way: Would you buy a banana for $1 if those same bananas were on sale down the block for 69 cents? Of course not! And, of course, a home ain't no banana.
No matter what you paid for your home, market values fluctuate -- both up and down. This can work for you or against you. But all that matters on the open market is what buyers are willing to pay now.
Use all your tools: Comps, AVMs, and your Realtor
The best way to get a handle on your home's sales price are the prices of similarly sized homes in your neighborhood -- otherwise known as "comparables," or "comps." For example, if a house near yours with the same square footage and numbers of bedrooms and bathrooms, and in similar condition, sold for $230,000 within the past three months, you can bet your own price will be in that ballpark.
For a quick snapshot, several websites (including this one) offer automated valuation models, or AVMs, where you type in your address and then get a price based on an algorithm that factors in comps in your area. But AVMs are just a starting point.
"No one has actually put eyes on your house, so an AVM can't really give you an accurate price," Crouch says. That's why you need your Realtor to visit your home, so she can factor in your home's unique strengths and weaknesses along with comps to come to a better estimate.
When your Realtor tells you a price, check it. Ask her how she came up with the amount, and look into the comps in your area yourself. Once you're able to pore over the info, Crouch says, "you'll be able to see a price range for yourself, so you won't feel like you're just having to blindly trust your Realtor."
Factor in upgrades with a grain (or two) of salt
Yep, you poured $10,000 into your brand-new chef's kitchen, or $15,000 to install an in-ground swimming pool. Sweet! So it stands to reason that you'd make that money back when you sell, right? Well, not quite. Surveys by the National Association of Realtors show that your return on investment for home improvements depends on what kind of renovation you've pulled off -- and how much prospective buyers want it in your area. Refinishing hardwood floors, for instance, will reap a 100% return, paying for itself. Convert a basement to a living area, and you'll recoup only 69% of those costs. The harsh truth: Not everyone is going to fall head over heels with your five-seat built-in hot tub.So do your research and find out what those upgrades will really get you.
Leave some wiggle room
Most buyers love to negotiate when you're trying to sell your house. So it helps to "let them win one," Crouch says. Instead of starting out with the absolute lowest price you can afford to go, add a bit of a cushion. How much? Crouch says you should round off your asking price in $5,000 increments. "It's just how people think," he says. So if you know you want $347,000 for your house, you can play it safe and round up to $350,000.
Also keep in mind that many first-time buyers may have a hard time coming up with cash for closing in addition to their down payment, even if their finances are good and they're qualified for a loan. Offering to cover closing costs -- while sticking to a higher asking price -- might help seal the deal.
Price with Internet browsing in mind
Once you find yourself a ballpark price you're happy with, it's time to fine-tune it. Keep shoppers' online search parameters firmly in mind -- small differences in your price can spell a big difference in your exposure.
"Home buyers typically fill out a Web form that has a minimum price and maximum price," says Crouch. "If you're a dollar outside of that range it is going to be like your house didn't exist -- they'll never see it." In other words: Price your home at $300,000, and you could miss out on a whole lot of people who are searching in the $250,000 -- $299,999 price range. So if you're on the cusp, consider rounding down to capture more eyeballs. Remember what we said about padding? It cuts both ways.
Test the waters with a soft rollout
While choosing a price can be scary, consider this one small loophole: Some brokerages offer a "soft" rollout plan in which they highlight the house as "coming soon" online, without officially listing the house in a multiple listing service. That buys you time to test the market, see if people will click at that price -- then adjust accordingly without having to officially lower or raise your price on the record.