Deciding on the Value of Your Home

A key part of putting your home on the market is to set the asking price. Ask me as many questions as possible that will help determine value. The questions below are a good place to start.

· What do I need to know about setting the asking price of my home?

· What is the current supply and demand for homes like mine?

· What have other homes like mine sold for?

· What is a Competitive Market Analysis, or CMA, and how can it help me?

· Is there a special offering that can be made for my home that would gain me more money?

Local Market Observations

As we head into the spring market, the need to properly price your home is critical. My indicators predict that although risk to the downside may be over home sales in our overall market aea have remained flat, both in terms of the number of sale as well as pricing. Interest rates are threatening to rise and are likely to fluctuate during the year with a bias to the upside. Inventory of available homes is high, as is the number of days each home is on the market prior to finding a buyer willing to move forward.

In past years we have had market favoring buyers, currently the market is much more balanced between buyers and sellers.

But buyers are still buying in the same price range as in the past. Although biased to the upside, interest rates are still historically low and incomes have remained stable. A basic truth is tthat homes priced competitively will get the buyers attention and will sell. Overpriced properties languish on the market and ultimately sell for less than they should have because the seller has run out of time. In this market, a well-priced home will sell in a reasonable amount of time

General Observations

Let's review some important considerations. There are certain factors that are beyond our control such as the location of your property, the finished square feet, types of rooms and the amenities that are in place. Those factors we can control are the appearance of the property inside and out, how aggressively we market, and the price including terms. It is critical for us to accept those factors that are beyond our control and to focus on pricing and preparation.

A home priced at market value will attract more buyers than a home priced above market value and will increase your chances for a sale within a reasonable time frame.

Suggested Price Strategy

Using the approach in the CMA report, I attempt to determine a range of fair market value, which is defined as the highest price obtainable from knowledgeable buyers within a given time guideline. My first goal is to set a list price that represents top market value, without going so high that it does not sell at all. The estimate given is not necessarily the highest or lowest price a property may bring. The price will ultimately be decided by the forces of the constantly changing market and a host of other factors such as the seller’s motivation, or a particular buyer's motivation. For example, if after a few weeks’ exposure to the market we find that comments from buyers and their agents about a property's price or condition are not favorable, we should adjust the price.

As sellers we must not forget that buyers have a vast amount of pricing information available to them from public records, assessing documents, and details of local sales. In fact, buyers are looking at the market on a day-to-day basis, and in their respective price ranges they can become quite knowledgeable. As sellers we must become less self-absorbed in our own homes and learn to see how buyers view our homes. We need to think like a buyer.

A special note: marketing professionals in the academic world tell us that buyers decide whether an asking price is within a "latitude of acceptance," i.e., whether a price is within a range of fair value. If in the buyers' judgment an asking price is too high, they will shun it and decline to negotiate, even if they otherwise favor the property. It is, then, critical for a seller to offer a price that suggests reasonable value -- asking prices should always be a "reference" price that points to value.

Price Range Recommendation

You should always have a listing price that is based on comparable properties that have recently sold. This price should also take into account properties currently available and under deposit, as well as those with recently expired listings.

A consideration for all of us is flexibility. Specifically, projecting an exact price in which a property will sell has become difficult due to uncertainty in the market: we don't know exactly what a particular property will bring until we expose that property to buyers.

Your satisfaction is important to me. I can assure you that I’ll work hard to bring you the best price possible for your home. Please don’t hesitate to let me know whenever you have questions or concerns.


Setting a price is one of the most important elements of selling your home. If the property is overpriced, it has a tendency to sell other homes in the area, all the while keeping your property on the market longer and losing the initial interest of buyers. I have seen this happen time and time again. When we sit down to set a price, I will show you a comprehensive Market Analysis.

A Market Analysis is an essential tool to determine the value of property. Location, condition of the property, recent sales for comparable homes, quantity and quality of properties both currently on the market and sold, and even listings that have expired, are all key factors in determining a good price to get your home sold quickly, with the least amount of hassle. Similar homes For Sale now show what we are competing against. Similar homes Sold recently tell what buyers are willing to pay for a home like yours in this area at this time. The expired listings represent the problems of over pricing. The desired result is to find a price that will attract a qualified buyer in a reasonable amount of time.

Once we have determined the value of your home, the next step is to ascertain an asking price. The asking price should not be too much above the actual value of your home.

Here are some things you should keep in mind:

· Realistic pricing will achieve maximum price in a reasonable time.

· An analysis of the market in your area featuring homes comparable to yours actually determines the value.

· The amount of money you spend on improvements almost never shows up as added value.

· Homes that remain on the market for a long period of time almost never get shown. Buyers are interested in something that is new and if a property sits on the market for a long time, they wonder what is wrong with the house that kept it from selling. Salespeople also sometimes forget that a property is there because they are constantly exposed to new listings. So if it does sell after a long time it will usually be for a much lower price.

· If the property is priced right from the start, it will usually give the biggest profit.

How Much Should I Sell My House For?

Buyers Shop by Price The biggest mistake too many home sellers make is inflating the price of their home in the false belief that it will result in a higher selling price, even if they have to reduce the price later. Exactly the opposite is true! That’s because buyers shop by price -- and typically spend months comparing homes in their price range. All an inflated price does is virtually guarantee that you home will get passed over every time. Your best chance of getting "top dollar" for your home is to set an accurate market price that will let your home compete with comparable homes. That way your home is most likely to compete successfully -- and be seen by the buyer who will appreciate its special features enough to make you the best possible offer.

Most Common Result When Listing Price is High Unrealistic Price (Above Market Value)

· Buyers compare an overpriced home unfavorably with similarly priced homes with more square footage and amenities

· The house sits on market

· Other agents see it as overpriced and stop showing it

· Even after price reductions, buyers may see its quality/value as "suspect"

· Most likely to sell at low end of its fair market value

. . . . And When the Listing Price is Fair Right Price (Fair Market Value)

· Buyers favorably compare it with homes of comparable size and features

· Realtors are eager to show it

· It enjoys frequent showings

· It is most likely to attract offer on high end of its Fair Market Value

· When Your Asking Price is Too High, Beware!

Deciding to List

So you’ve decided to sell your home and have a fairly good idea of what you think it is worth. Being a sensible home seller, you schedule appointments with three local listing agents who’ve been hanging stuff on your front doorknob for years. Each Realtor comes prepared with a "Competitive Market Analysis" on fancy paper and they each recommend a specific sales price.

Amazingly, a couple of the Realtors have come up with prices that are lower than you expected. Although they back up their recommendations with recent sales data of similar homes, you remain convinced your house is worth more.

When you interview the third agent’s figures, they are much more in line with your own anticipated value, or maybe even higher. Suddenly, you are a happy and excited home seller, already counting the money.

A Sales Practice Called "Buying a Listing"

If you’re like many people, you pick Realtor number three. This is an agent who seems willing to listen to your input and work with you. This is an agent that cares about putting the most money in your pocket. This is an agent that is willing to start out at your price and if you need to drop the price later, you can do that easily, right?

After all, everyone else does it!

The truth is that you may have just met an agent engaging in a questionable sales practice called "buying a listing." He or she "bought" the listing by suggesting you might be able to get a higher sales price than the other agents recommended. Most likely, he or she is quite doubtful that your home will actually sell at that price. The intention from the beginning is to eventually talk you into lowering the price.

Why do some agents "buy" listings this way?

There are basically two reasons. A well-meaning and hard working agent can feel pressure from a homeowner who has an inflated perception of his home’s value. On the other hand, there are some agents who engage in this sales practice routinely.

What Happens Behind the Scenes

If you start out with too high a price on your home, you may have just added to your stress level -- and selling a home is stressful enough. There will be a lot of "behind the scenes" action taking place that you don’t know about.

Contrary to popular opinion, the listing agent does not usually attempt to sell your home directly to a homebuyer. That would be inefficient.

Listing agents market and promote your home to other agents who do work with homebuyers, dramatically increasing your personal sales force. During the first couple of weeks your home should be a flurry of activity with buyer’s agents coming to preview your home so they can sell it to their clients.

If the price is right.

If you and your agent have overpriced, fewer agents will preview your home. After all, they are Realtors, and it is their job to know local market conditions and home values. If your house is dramatically above market, why waste time? Their time is better spent previewing homes that are priced realistically.

Dropping Your Price...Too Late

If you start out with a high sales price, then drop it later -- your house is "old news." You will never be able to recapture that flurry of initial activity you would have had with a realistic price. Your house could take longer to sell.

Even if you do successfully sell at an above market price to an uninformed buyer, your buyer will need a mortgage. The mortgage lender requires an appraisal. If comparable sales for the last six months and current market conditions do not support your sales price, the house won’t appraise. Your deal falls apart. Of course, you can always attempt to renegotiate the price, but only if the buyer is willing to listen.

Your house could go "back on the market."

Once your home has fallen out of being “under deposit” or sits on the market awhile, it is harder to get a good offer. Potential buyers will think you might be getting desperate, so they will make lower offers. By overpricing your home in the beginning, you could actually end up settling for a lower price than you would have normally received.

Realtors Talk to Each Other

If you start out with a sales price that is too high, there is a high likelihood you interviewed other agents. They didn't get the listing, of course. They got "aced out" by someone telling you what you wanted to hear.

If your listing agent routinely engages in "buying" listings, he has probably aced out scores of other agents in the same way. Being human, Realtors talk to each other. If they don’t like your listing agent, not as many of them will be showing your home.

In short, you may have ended up with an agent who was good at selling you, but not good at selling your house. And you’re going to pay them a commission for it.

It is human nature for you to want the highest price for your home. However, when you choose the agent who promises what you want to hear, it often leads to stress and frustration. Most of the time, it will take you longer to sell your home. Possibly, you will end up selling at a lower price instead.

Or maybe as a result of reading this, you will choose one of the "good" Realtors in the first place. In that regard, I offer my services.

Do You Want Your House For Sale or Do You Want It Sold?

It is important to keep in mind that in any market, homes sell based on three main factors: price, exposure and condition. The single most important ingredient in selling your house is pricing it correctly. You must start thinking about your house objectively, not emotionally, as a product or a commodity which must compete against every similar product on the market. The question must be... how long do you want your home to be for sale?

We in the real estate profession will be glad to provide you with a Comparative Market Analysis (CMA), which is essentially an evaluation and opinion of how much your house would sell for in our current real estate market. It will be compared to houses currently on the market, houses that failed to sell (for whatever reason), houses under contract (pending sale), and houses that have sold within the past 6 months.

We consider your reasons for selling and your timetable, details about your house and its strengths and weaknesses, and how your house fits into the current real estate market. While location is important, the neighborhood is critical to pricing. People frequently buy the neighborhood first, and the house second. The same home in a different neighborhood can have a dramatically different value.

A primary consideration is the overall market. Supply and demand dictate home sales - whether it's a so-called "seller's market" or a "buyer's market." Are there more buyers than sellers, or vice versa? Homes will sell more quickly and at higher prices if lots of people want to buy, and the inventory of available houses is low.

Properly priced homes will sell even in a "buyer's market" however. The number of similar unsold homes in the market area competing against your home is critically important. Your home must be positioned competitively against similar homes in the market in order for it to sell.

How fast your house will sell is up to you, the seller. Time on the market is directly related to price. You need to price it correctly from day one to meet your personal time schedule. The longer it's on the market, the more mortgage payments, homeowner's association dues, real estate taxes, utility bills, maintenance costs, etc. you will need to pay.

The market is boss. Your home will sell for what a buyer is willing to pay for it in comparison to all other similar homes on the market, and no more! What you paid for it, what you think it's worth, how much cash you need out of it, what your friends, Realtor, or even an appraiser think it's worth do not set the real value. The cold, hard truth is that only the market sets its value. You, the seller, need to set your time table and price accordingly.

Some pitfalls and fallacies in pricing a house to sell follow: The house down the street is "going for" a certain price, and since yours is comparable, or maybe better, it is worth at least as much. The truth is that the asking price of another house is no indicator of the value of your house. It is very likely overpriced itself. Even if it sells, its final selling price cannot be determined until after the sale closes, and the final selling price might be far less than the original asking price.

Massachusetts requires all municipalities to assess property at “100% of value,” this means the assessed value of a property should be close to what it would sell for on the open market. Since the implementation of full value assessments have been very optimistic to say the least, oftentimes lagging selling prices here in the Upper Pioneer Valley by as much as fifty percent. It goes without saying that the government wants to collect the most tax possible from each of us. The assessments are based on classes of houses in general areas, and are not specific to your house, and its particular condition and appeal.

You or your agent think you should leave some "room to negotiate" in the asking price you set, or you or your agent think you should set a high price at the beginning to "test the market," and reduce it later if necessary. Both of these tactics will cause your house to remain on the market longer. It's a fact that the first 30 days of a listing are the most critical, and if a house is on the market more than 60 days without eliciting offers, it is overpriced. Additional marketing, open houses, advertising, etc. are not the solution. A lower price is.

Buyers always want to know how long a house has been on the market. If it's been on the market for long, they ask "what's wrong with it? Why didn't it sell already?" Their sense of urgency is far less. But if it's new on the market and well-priced, they'll want to move fast, and will assume that you, the seller, are not sufficiently motivated to accept a lower offer. If it's been on the market for a while, they'll be in no hurry. They'll put off action, shop around some more, and maybe find something better and cheaper, expecting your house to still be there to fall back on if necessary.

Buyer agents will frequently make a market analysis of properties their buyer is considering purchasing. A house that's been on the market for a long time encourages "low-ball" offers, since buyers assume that the seller is getting desperate, and maybe they'll be right...

Even if you do get your (high) price, unless the sale is for cash or you are carrying a mortgage note for the buyer, a lending institution will require an appraisal of the value of your house. Appraisers are neutral 3rd parties who confirm for the lender that the buyer has not paid too much for the property. They get paid whether it sells or not, and are only interested in protecting the lender from lending money on a property that is not worth as much as a buyer has agreed to pay.

They will compare it to three other properties in the immediate neighborhood that have sold within the past three to six months. Contracts on houses at prices higher than market value will not appraise at the contract price, and this is a contingency built into the contract price. Even if the appraiser somehow comes up with the contract price, loan underwriters sometimes reduce the appraisal amount themselves unless at least one of the three comparable properties sold at a higher price than the contract price of your property.

There is a direct correlation between the initial asking price, time on the market, and the final selling price. And it is a fact that houses that are correctly priced from the beginning actually do sell for more than houses that are initially overpriced.

Real estate agents and their clients like to look at new, fresh listings. It is also a fact that most homes are not sold by the listing agent, but by another agent representing the buyer, either in the same office or in a cooperating Realty. The Multiple Listing Service (MLS) and its computer are the primary tool enabling an agent to set up an itinerary of houses to show their prospective buyers, and any buyer’s agent can tell approximately how long a house has been on the market by looking at the MLS printout of your property.

Agents working with buyers are looking for houses that are most attractively priced within their buyer's resources, hoping for a quick sale. These agents are working to find the best house at the best price for their buyers. And they will freely offer their opinions to their buyers on the pricing of your house.

If, in their opinion, your house is overpriced, they will bypass it to show more competitively priced houses, or they will show your house in order to show how much better another similarly priced house is by comparison. They will use your overpriced house to sell your competition!

If you've had your house on the market for a while and it doesn't sell, and you do lower the price, many agents will not notice the new price, and will only remember that it is "overpriced" and won't show it. In the meantime, your house will get shopworn, you will become tired of leaving frequently so that an agent can show your home, and you will get tired of trying to keep it in "show" condition all the time.

You might be concerned that we might want to under price your house in order to get a quick sale. Our commission usually relates to the final selling price, and any real estate professional will want to get top dollar for your house as well as a quick sale. It will surely sell quickly if it's under priced, but it will also sell quickly if it's correctly priced.

The real estate profession is extremely competitive, and listings are hard to get. This leads many agents to attempt to "buy listings" by promising a seller that they can get a higher price for them than what other agents tell them, hoping to get the listing, then get the sellers to reduce the price to a realistic level later. A seller that lists under these conditions runs all the risks associated with overpriced listings, and will probably get disgusted with Realtors as a whole, and their Realtor in particular. Remember that pricing your property is not a "bidding war" between Realtors, and that the Realtor is not the buyer!

Any real estate professional that provides a reasoned evaluation of the market value of your property, high or low, must be able to back up their opinions with hard data, or you should be suspicious. The best Realtors don't play the game of trying to "buy" listings. However, if we make our best evaluation, and still are unable to get your house sold within a reasonable period of time, and you are satisfied that we are doing a good, thorough job of marketing your property and keeping you informed, then the solution is not changing Realtors, but lowering your price.

If you have made a number of expensive improvements to your property, you may not be able to realize all, or even part, of your improvement costs in the sale of your house. The neighborhood is more important than improvements, and frequently homeowners improve their home to the point that it is much nicer than those around it. Lots of prospective purchasers will "drive by" your property, and if it is high-priced compared to the neighborhood, they will never ask to see the inside of your house. The "best home in the neighborhood" may not bring a significantly higher price than those around it, but it will sell much quicker at a competitive price. However, improvements made to a house that is initially less desirable and expensive than others in its neighborhood may significantly increase its sales price, even more than the costs of the improvements in some cases.

Many houses are sold on contingencies (subject to), frequently involving mortgage financing. The buyer’s mortgage lender will send an appraiser to judge the value of your property. If your property is overpriced it won’t appraise for what it being sold and the sale will be lost. Additionally, if you need to sell your house in order to buy another, proper pricing is even more critical. You will have a built-in time limit, and if your house doesn't sell within that time, you will lose the house you want to buy, and will frequently lose appraisal costs, credit fees and other loan fees, and possibly some equity money as well. What you think you need to realize from the sale of your house really is less critical than a quick sale, because you may be able to make it work with slightly less proceeds, but you probably can't make anything work if your first house doesn't sell!

Whatever your ultimate intentions, you must ask yourself as objectively as possible what your timeline really is - and plan accordingly. A house that is for sale causes a lot of stress and anxiety. A house that sells quickly causes peace of mind and security and allows you to realistically plan for the future. Approach selling your home with as little emotion as possible and try to give it a hard look as a buyer would. Take a big dose of reality when you price it, and you will do fine. Do you want to have your house FOR SALE, or do you want to have it SOLD? The choice is yours.

Final Thoughts on Pricing

Perhaps the most challenging aspect of selling a home is listing it at the correct price. It's one of several areas where the assistance of a skilled real estate agent can more than pay for itself.

Too High Can Be as Bad as Too Low

If the listing price is too high, you'll miss out on a percentage of buyers looking in the price range where your home should be. This is the flaw in thinking that you'll always have the opportunity to accept a lower offer. Chances are the offers won't even come in, because the buyers who would be most interested in your home have been scared off by the price and aren't even taking the time to look. By the time the price is corrected, you've already lost exposure to a large group of potential buyers.

The listing price becomes even trickier to set when prices are quickly rising or falling. It's critical to be aware of where and how fast the market is moving — both when setting the price and when negotiating an offer. Again, an experienced, well-trained agent is always in touch with market trends — often even to a greater extent than appraisers, who typically focus on what a property is worth if sold as-is, right now.