How to price a home for sale?

When you’re ready to list your home for sale, the listing price is one of the big first decisions to make. It’s important to determine the right asking price with the help of a professional that knows the market. There are some dangers in choosing the wrong listing price.

If your home is priced too high, you may not see much interest from buyers. If your home is priced too low, then buyers may ask themselves if there is a problem with the house.

You may not see much interest in either of those scenarios. A Comparative Market Analysis is what realtors create in order to accurately price your home for sale. 

What is a Comparative Market Analysis? (CMA)

The Comparative Market Analysis, or CMA, is the analysis report created by realtors to accurately price homes for sale. The CMA uses data about nearby, recently sold homes to calculate your selling price.

The CMA also takes into account the state of the current market, condition and location of your home and any updates performed to the house. 

A good realtor will take all of this into consideration to ensure your home is priced to sell. Another tip to keep in mind is regarding updates.

If your neighbor recently sold their home and included upgraded granite countertops, new carpet, new roof, etc., but your home does not include these updates, then your home may list at a different price point.

The 5 main factors that factor into pricing a home are: 

1. Comps 
2. Location
3. Condition
4. Updates
5. Current market 

The 2 minor, but not to be ignored factors that also affect pricing: 

1. Pricing psychology 
2. Online buyer search habits

Let’s explore all of these in more detail. 

What are Comps?

Comps, which is short for comparables, are pulled by your realtor. Your realtor pays to access data on what nearby, similar homes to yours sold for. This can be a very nuanced process, as your realtor chooses the homes to compare yours to.

Your realtor will want to pull comps on homes with similar square footage, interior finishes, and other similar features. This is the main and largest contributing factor in determining your listing price.

The comp is based off of homes ideally within a quarter-mile of your home and within 200 sq. ft. of your homes size. 

Comps used in your CMA are based off of the final sale price of a home, not the list price. This is an important differentiator.

It’s important to note that the comps used in your CMA should be based on the final sale price, not the list price.

The final sale price may include concessions or other changes that results in a final sale that is very different from the list price. 

If there are no similar homes in your immediate area to pull comps on, then your realtor can expand the location search wider in order to find a match. 

How does my home location affect my CMA?

Location can be an asset or a hindrance to both your list and final selling price. Imagine two houses, both exactly the same in all ways; except location. One is located in a typical Oklahoma neighborhood and is close to restaurants, shopping and a Starbucks.

The other is located 25 miles out of town; not a neighbor in sight for miles. How will the list prices for these two homes differ? The true value of your home is what a buyer will pay.

The true value of a home is what a buyer will pay. 

This is where a local realtor can provide their expertise. Location can also be affected by the buying desires of the local community.

If they value quietness and wide open spaces, then perhaps the home out in the country is seen as a more desirable location. 

How does the condition of my home affect my CMA?

The condition of the home can make a huge difference. If your home is in need of costly repairs such as a new roof or new countertops, those costs must be considered as part of the overall equation.

If a buyer believes they have to spend considerable amounts of money to get the home up to livable condition before buying, then it is likely they will request for the home price to be lowered. 

It is recommended to have a pre-inspection of your home so you’re not caught off guard to any needed improvements before a potential buyer catches them, adding unexpected costs.

Read more about the importance of pre-inspections, to avoid surprise costs when selling.

Do updates to my home affect my CMA?

Updates to homes are not considered equal. Here in Oklahoma, while a home with a pool is highly desirable, rarely do they help raise the overall selling price of the home.

Alternatively, an older home that has been updated to modernize the cabinets, flooring, and paint color may help it fetch a higher price point and could be a positive net return.

If you are considering performing updates to your home before selling, it would be a good idea to inquire for realtor advice so you don’t end up putting in more updates than necessary to meet buyer expectations.

Also, while there are many DIY home updates you can make, use good wisdom to know when you’re out of your league. Buyers can tell the difference between a job that is DIY and they’ll have to pay someone to redo, or one that has been professionally completed. 

How does the current market affect my list price and CMA?

The real estate market goes through cycles, just like most other industries. The market that you find yourself in when you sell your home will affect the final selling price of your home. The industry is based on the principles of supply and demand.

If you find yourself in what’s called a “sellers market”, then that means supply is low on homes available for sale. It is possible to see bidding wars on homes between potential buyers, and homes may receive a price that is thousands of dollars more than what the house is actually worth.

Homes sell very quickly in this market, some as quickly as a couple of days. 

On the flip side, a buyers market is a time period where there is ample supply and many homes (new or used) to choose from. The buyer has more power in this situation, and has the ability to ask for more concessions, and will likely pay a fair or below value price for the house.

Homes will take longer to sell in this market, and sellers will often lower their asking price in order to compete. 

How does pricing psychology and search habits affect how I should price my home?

Let’s say your realtor produces the CMA and your home is recommended to list at $503,000. Pricing it at $499,000 may help it be seen by more potential buyers who are using the web to price point their home search.

People will often search for homes such as “under $500,000” or “under $350,000”, etc. This is just something to take into consideration and be aware of. 

Also, pricing a home at just under the round dollar amount has been shown in studies to help buyers feel more confident that they are getting a better deal. We can see this commonly in grocery stores, where products are often sold for .99 rather than an even $1.00. This same concept can be used to price your home at the right list price!

Pricing a home with a very weird number, such as $304,523 isn’t recommended and can draw negative attention to your home.

Buyers may wonder more about why you chose that price then about whether the home is right for them. You don’t want to introduce any opportunity for questioning the process and you want to make it as easy as possible on your potential buyers to fall in love with your house. 

How can I estimate the value of my house myself?

There are many calculators online for an estimate of your home value. We like the calculator from Realtor.com. All online calculators are a “within ballpark” estimate. 

They do not take into consideration current condition, updates, any changes to the surrounding location of the home (such as a Walmart built immediately behind your neighborhood).

While online calculators are useful, they are not an equal substitute for a CMA from a knowledgeable realtor.

How accurate are Zillow Zestimates and Redfin Estimates?

On both, the estimates are only as good as the data behind them. Zillow especially has been known to be off by 10% or even greater, so it’s always best to work with a local realtor that can visit the property in person and fine tune the CMA for you. 

How do I get a CMA?

Realtors provide CMA reports for you. JMR Realty creates CMAs at no cost. To ensure that the report is as accurate as possible, we prefer to visit the location to ensure the data aligns with what we are seeing. Click below to request your free CMA today.

What could negatively affect my home selling price?

Although your CMA is most heavily determined by what other homes nearby you have sold for that are within your sq. ft. range, the condition of your home is the next greatest contributing factor.

For example, if the home next door to you just sold for $160 sq. ft. and the homeowner previously remodeled the kitchen, repainted the house and put new carpet in, and you haven’t, then likely you will not get the same asking price.

This is where a realtor’s expertise comes into play to help you work through the nuances of pricing to make sure you get your correct home value!

Should I get an appraisal before I sell my house? 

Home sellers do not need to spend the additional money for an appraisal. While it may sound logical that an appraisal will help discover the correct listing price, that’s not its intended use. The appraisal, if needed, is ordered much later in the process and is the responsibility of the buyer.

If the buyer is financing the home with a bank, the bank will likely require an appraisal.  Banks will do this to ensure they are not lending more than the home is worth.

Even if the seller does get an appraisal, banks typically want to hire their own appraiser to ensure an unbiased assessment. So, it would be best to save your money.

When you’re ready to price your home for sale, we are ready to help!  For more tips on the home selling process, check out our list of 6 costs to anticipate before moving. For home sellers in Oklahoma City, Edmond, or nearby towns, contact Jimmy to start your CMA on your home.

We look forward to serving you today!