Without question, the biggest mistake you can make when selling your home is to price it wrong—especially too high. You can have the nicest home in the neighborhood and if you price it above the market, it can sit there and sit there. And then it gets the stink of a stale listing, where buyers become afraid to make an offer. And thus begins the downward spiral of price reductions and capitulation.
Most home sellers who work with a real estate agent tend to defer the pricing decision to their agent. The agent starts by assembling a Competitive Market Analysis (CMA), which is a combination of recently sold homes and currently for-sale homes in your neighborhood. Then they sit down with you, go through the list, and the two of you decide on an asking price for your home. But relying too heavily on the agent for the asking price can be a real mistake.
First of all, agents are generally not certified appraisers, which means their choice of asking price is just a guess—an educated guess—but a guess none the less. Second, agents are subject to the Principal-Agent Problem, which means their choice of asking price is not without bias. The faster the home sells, the sooner they get paid. This incentivizes them to choose a lower asking price, which benefits them at your expense. Finally, it is unlikely your agent knows more about your neighborhood then you do. You may have even been inside one or two of the recently sold or for-sale homes in the CMA. It is doubtful your agent has. And the insides of those homes has a dramatic impact on the price of yours.
So, how do become as smart at pricing your home as your agent? Simple, become a buyer who is looking to buy your home. First, you set up a simple spreadsheet that tracks the asking price and sold price of homes in your neighborhood that match the specifics of you residence. Entries on the spreadsheet include the following:
- Listing date
- Square feet
- Asking price
- Sold date
- Sold price
Next, about 90 days before you are ready to sell, go to any (or all) of the online real estate sites (Trulia, Zillow, Homes.com, Redfin) and sign up for e-mail alerts that notify you whenever a home goes up for sale or gets sold in your neighborhood that matches your home’s specs. Then, whenever you receive an e-mail alert, enter the information into your spreadsheet. You can even add comments to an entry if you know something about the condition of the home.
With this approach, not only can you see what homes similar to yours sell for, but you can also see how long they took to sell and what percentage of the asking price they got. What is more, by doing this for 90 days, you will also get a feel for price momentum in your neighborhood: what direction and how fast are the prices moving.
I promise you, if you do this for three months, you will now as much, if not more, about the pricing of your home than the agent you work with. Then, when you sit down with them to determine the asking price, there will be two informed people making the decision instead of just one.
To see how ReaListing helps home sellers make better decisions, click here.
To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.