In selling your home in the San Francisco East Bay area, one of the most important things to consider is pricing. Your listing price can greatly influence how long your property sits on the market, and how much profit you will eventually make. With this in mind, it’s important to price your home accurately while keeping it competitive.
How to price your home
Your Realtor can conduct a Comparative Market Analysis (CMA) to propose a listing price for your home. However, you will ultimately decide how much to list the property for, so it’s a good idea to know and understand how a CMA is conducted.
A CMA starts with identifying “comps” or comparable listings and sales. Look into the prices of similar homes that recently sold in your area and are currently for sale. Confine your selection to properties within a quarter or a half-mile radius of your home, and preferably, only to those that sold in the last three months.
Comparable homes must also have similar ages, so limit your “comps” to properties built in the same decade or time period as yours, such as the 1950s and 60s, the 1990s and 2000s, and so on.
Square footages must be within 10% to 25% more or less than your home’s.
Compare your home to at least 3 comps, and adjust the price based on how superior or inferior your home is compared to these comps. For example, if a property has 3 baths and yours has only 2, you should adjust the sale price down. If your home has a deck or patio and the comp does not, adjust your sale price up. Get the average of these comparative prices to arrive at a comparable sales price.
Other factors to consider in pricing your home
To come up with a listing price that will truly be competitive without sacrificing profit, the following factors have to be considered, as well:
- Price Reductions
Get the original list price and final sale price of the comps you’ve identified, and find out how much and how many times the price has been reduced. This will tell you if the home was overpriced at the start, and how much the seller had to reduce the price to close the sale.
- List to sale ratio
Compare the final listing prices of your comps to their sale prices to determine the list to sale ratio. This information will give you an idea on the condition of the market. In a seller’s market, sold prices are often higher than list prices. Conversely in a buyer’s market, homes sell at or lower than their list prices.
- Days on market
Find out how long your comps have been on the market before they were sold. If any home was previously listed, then withdrawn and relisted, add the number of days of the original listing period. Look for common factors among listings that took longer to sell. Were they originally listed at a significantly higher price? Were they represented by the same agent? Were they marketed adequately? Knowing the answers to these questions can help you avoid a similar situation.
- Active listings
Look at the prices of comparable active listings and how long the homes have been on the market. See as many of these homes as possible, and compare them with yours. Note the features that you like and those that you don’t. Make an assessment of why buyers would prefer these homes over yours and vice-versa. You can adjust your list price up or down, depending on how your home stacks up to your competitors’, or undertake home improvements to bring your home up to par.
In setting your home’s listing price, you can choose to go over, under, or at fair market value.
Many sellers tend to overprice, thinking they can negotiate down with a buyer. In a seller’s market where the demand is greater than the inventory, pricing your home slightly higher than the market value may work. However, if you price your home too high, you can turn off potential buyers and this can cause the property to sit on the market longer than necessary.
Underpricing may seem counterintuitive, but in the East Bay housing market, this has been a highly successful strategy for sellers. By listing your home slightly below its fair market value – perhaps around 10% less – you can attract more buyers who realize they’re getting a good deal. This can trigger a bidding war, which can ultimately drive your selling price higher.
The safest option is to list your home at fair market value. However, this may result in lost opportunities for a higher profit.
Your Realtor will help you determine a competitive and profitable listing price, so it’s important to work with one who has the experience and knowhow in the market.
With over 30 years of experience in the SF Bay Area market, I can provide the expert guidance you need in pricing your home. Check here for more tips in selling your house, and get in touch with me today. Leave me a note at this website or call me at 510.406.4836.