After making your house presentable enough to be shown, you need to price it appropriately. The main complaint real estate agents seem to have about For-Sale By Owner is that the people who are selling their home do not have a realistic expectation of what their house can sell for. It is important to pick the correct price because if you price too high then people might be reluctant to make an offer because what they are willing to pay is so far below what you are asking that they might feel like it is a waste of time. If you price too low, then obviously you might miss out on making the most money, and also possibly make people assume that the price is too good to be true and that there must be something wrong.
The first thing to do is research what homes have been selling for, and what homes are currently being listed at, and what direction the market is headed. A few resources available are:
- Zillow is a great source of information. The site contains estimates of what current houses are worth, and shows you what homes have sold for recently. While the information isn’t guaranteed to be 100% accurate, I found it to be accurate enough. I found their z-estimate functionality to be the most helpful.
- CMA (Current Market Activity) – This is a report that real estate agents have to aid their customers in pricing and purchasing. The self-service real estate broker we used also provided us with this report. While it was interesting, it seemed that the comparable houses that had sold near us were sold a few months prior, and the market was rapidly going down. It seemed that a price based solely on this analysis would be too high.
- Pretend you are a buyer. The site that I found the most user friendly to look at houses was John L Scott.com. They have a neighborhood function where you can select a neighborhood and it will show you all the houses for sale nearby. Once our house was ready, and I had photographed it, I pretended I was a buyer and searched for houses in different price ranges in our neighborhood and I then compared the photographs in those listings with ours to see how I felt we compared.
When we were picking a price it was difficult because there was lots of new construction in our area. Those houses were bigger, but had no yards. Our house had a yard, but was smaller. The houses with more property were priced higher, but you could get a much larger house for significantly less. We found a price range where our house looked very comparable to the other houses, and at 5k less ours looked noticeably better. We decided to go with the 5k less because the market was poor, and we knew we were saving money by not having an agent thus we could afford to pass on that savings to the buyer.
The drawback of the low price was that the people who did buy our house were looking above their price range and because the market was poor no one is going to offer full price. Thus the offer we received was well below what we were asking. That is the one problem when researching prices is there is no information on what concessions the seller made to the buyer. I have heard rumors that this information may become more available, but at then (and maybe now?) it was not, so it is hard to say what is fair, or not.
As a side note when we were buying, the agent we were working with was not happy with the fact we were not using an agent to sell. Her number one concern was that our house was not priced appropriately. She briefly ran a CMA and from the results it seemed that we had priced our home too high, BUT she did not know the neighborhood or area we lived in. The houses she was comparing ours to were not in our specific neighborhood, which was known to be nicer, and some were in a neighborhood that were right next to a garbage dump (which was not noted on the report). Which demonstrates the fact that if you do work with an agent, it is important to find one who knows the specific area very well.
If you find these posts useful and wish to offer monetary reciprocation I would gladly accept paypal donations or amazon.com gift certificates. Even just a dollar would be nice. ;)