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Top skill of a listing agent: pricing homes for sale, correctly.

By
Real Estate Agent with Thompson Company, REALTORS® 240.593.2860 MD594797

Experienced REALTORS® make it look so easy (at times to our detriment.. but that's a different blog post). We confidently recommend an optimal list price range that sometimes falls right in line with estimates you saw online, and other times it's more or less (by a lot). It's also pretty obvious to us when a house is overpriced, perhaps not at first glance but close enough. It's the years we spent honing our craft, the hours spent touring homes, the research, keeping up with market trends and neighborhood developments, and the networking with other agents and appraisers that all contributed to developing and fine-tuning that skill. Yes, pricing homes for sale correctly is a skill because it takes more than aggregating some data.

So how do we come up with the list price we recommend? I can't speak for all Real Estate agents, of course, but here's my approach.

Let's start with what I don't do:

1. Look up AVMs (automated value models) on 3rd party websites popular with consumers and run with them. These models provide a ballpark at best and a completely misleading guesstimate at worst. Why is that? The comparables used are not always actually similar. They can be a different type (townhomes vs. detached or colonials compared with ramblers), or in a not comparable neighborhood. Sometimes the values include refis pulled from public records, completely disregarding the fact that often refinances are well below market value. While I do always check what these sites think your house is worth, it is not how I arrive at my recommended price range. 

2. Establishing a price range and then adding on our negotiated commission. Recent news coverage may lead you to believe that this is how it's done but it is completely false. The value of your home is always based on the most comparable sales, that is closed listings that have ideally settled within the last 90 days (or longer if the market dictates). Appraisers will also not subtract the commission from the contract price to arrive at fair market value. That is just not how it works. They may, however, include one or two active listings to support the value. 

3. Pricing your home based on what your neighbor sold for, or how much money you've invested in the property. Regardless of differences or the time that has passed since they sold. Most comparable is really key here! If your neighbor's home is a 3,000 square foot Colonial but your home is a 1,500 square foot rambler, then it is not a relevant comp. Time also matters - especially in a declining market (that's not the case now but Real Estate is a cycle and at some point in the future it will shift again to a more balanced one, or one that gives buyers the upper hand). Improvements do increase the value of your home (updated kitchen & baths, or new hardwood floors for example). However, some items are considered maintenance that do not necessarily add value to your home. These can contribute to the overall condition, and are attractive to buyers, but you won't see a value adjustment for a new water heater for example.  

What does matter when pricing your home correctly? 

1. The most recent sales that are most comparable to your home. Recent, however, can vary based on location and market activity. While I can't predict which recently sold homes end up in your home's appraisal, I do approach pulling comps with the appraisal in mind. It is my business practice to always meet with the appraiser and provide a package to them with all relevant information, including the comps we considered with adjustments made.  

2. Improvements and unique features, or deficiencies and obsolescence. Does your home have a recently remodeled kitchen while the most recent comps had an outdated one? That matters. Did you build an addition increasing the GLA (gross living area) that comparable homes lack? That matters. On the other hand, it also matters if your home is fronting a busy street while the comps nearby are backing up to parkland. It's important to note that while a finished basement adds to the appeal for buyers, it is not treated the same as above-grade square footage.

3. Neighborhood knowledge and - if possible - a visit to listings that could become comps. When I start working with a seller, I keep a close eye on all sales activity and make an effort to look at new listings in their neighborhood that could be relevant to their sale. While an appraiser does not set foot in the most recent homes sold, we can - and should - while they are on the market. Floors don't creak in pictures, and deficiencies are not always obvious in professional photography. With that firsthand knowledge, I can point out to an appraiser when a comp was of different quality or needed much more TLC than is evident in its virtual presentation. 

Skills of a listing agent: pricing homes, correctly.Pricing your home is not a matter of checking what Zillow and Co. have to say, but preparing a comparative market analysis, adjusting for any differences, and having knowledge of your neighborhood, its appeal, and current market trends. 

When you interview agents to list your home, don't just ask how much, but listen to their explanation. How do they justify the recommended price? Going with the highest may be tempting, but it may not be the price a buyer is willing to pay, or an appraiser will support. Overpricing your home will cost you valuable time on the market, it may stigmatize your property and have buyers wondering what's wrong with it. In the end, it may cost you more than pricing in the correct ballpark to begin with. 

Skills of an experienced listing agent, pricing homes for sale, correctly. This skill also includes knowing when to recommend, or facilitate, a pre-listing appraisal. Some homes are just so unique with comps few and far between. While it cannot be used by any buyer, it does help establish a list price and a copy can be made available to interested parties. 

Posted by

Andrea Bedard
Thompson Co., REALTORS®

Silver Spring, Maryland
andreabedard.com

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Comments(13)

Dan McElfresh
St. Louis Living powered by ExP Realty - Cottleville, MO
Your St. Louis real estate & lifestyle guide

Great detail and great explanations!!

Apr 08, 2024 03:35 PM
Michael Elliott
Fathom Realty - Burlington Township, NJ
Burlington, New Jersey Residential Sales

Awesome, great post, spot on.

Apr 08, 2024 03:41 PM
Kathy Streib
Cypress, TX
Home Stager/Redesign

Hi Andrea- excellent!!!  Many don't understand how an agent comes to a List Price. I know there are many factors that a true professional (like you) takes into consideration. 

Apr 08, 2024 06:37 PM
Andrea Bedard

Thank you, Kathy Streib. I recently toured a home with a buyer that was overpriced by at least 50K. The listing agent's explanation was how much money the seller had put into the home. There were some fabulous upgrades but that was true for the recent sales, too. It was an appraisal issue in the making, my buyer passed.  

Apr 09, 2024 10:57 AM
Michael Jacobs
Pasadena, CA
Pasadena And Southern California 818.516.4393

Hello Andrea - so many outside the industry think the practice of real estate is simpler than it actually is.  Your explanation of one of the most important skills of a local practitioner shares a lot of detailed information.  Your post is well presented and shows your professional qualifications and experience.  

Apr 09, 2024 03:29 AM
Andrea Bedard

That is so true, Michael Jacobs. I always try to find solutions before I present my clients with an issue. At times, that means a lot of research, getting expert input (from a contractor, an appraiser, a title person), and many, many calls. My clients don't see that part but they always appreciate when I not only present a problem but possible solutions along with it. 

Apr 09, 2024 11:01 AM
Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Apr 09, 2024 05:20 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

This is an excellent explanation of  how you come up with a market price. I agree with everything you've said!

Apr 09, 2024 05:32 AM
Andrea Bedard

Thank you, Kat Palmiotti! I know you operated in much the same way.  

Apr 09, 2024 11:01 AM
Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Loved your post Andrea Bedard  sadly I see agents taking listings not for what they should just because they want to get a listing... ironically they are banking on convincing the seller for a price reduction.... had to smile you see listings over priced by $50k I see listings over priced by millions in my market and they linger on the market:)Endre

Apr 09, 2024 08:30 PM
Andrea Bedard

Overpriced by millions is not a problem we have around here, Endre Barath, Jr. That's crazy! The 50K was pretty substantial for that little house I showed. 

Apr 10, 2024 07:35 AM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher
I think that’s all good for this particular. He’s a property. I hope even more goes well.
Apr 13, 2024 11:35 PM
Leanne Smith
Dirt Road Real Estate - Golden Valley, AZ
The Grit and Gratitude Agent

Very good explanation. I might add comparables must be apples to apples. This is especially true in rural area with a mixture of different features.

Apr 14, 2024 11:16 AM
Andrea Bedard

Thank you, Leanne Smith. We don't use comps that are a different type. But, the bots that generate the 3rd party estimates on popular websites don't seem to know that. I frequently see townhomes used as a comp for detached homes. 🤷 

Apr 16, 2024 11:39 AM
John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

I like to check Zillow and a couple of other sites for an estimate of the value of my home from time to time. I laugh because those estimates can vary by $100,000 or more. 

Apr 15, 2024 04:46 PM
Andrea Bedard

I check them all, too, John Juarez. The differences can be wild!  

Apr 16, 2024 11:40 AM
Endre Barath, Jr.
Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Had to come back and congratulate you glad the post got Featured now we just need more comments:)Endre

Apr 19, 2024 10:34 PM
Andrea Bedard

I appreciate that, Endre Barath, Jr.! It was already too far down the blog roll when it got featured.. oh well! I still like the gold star!  

Apr 22, 2024 08:18 AM
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

This is a really good post to share with new clients - to remind them of what our value proposition is

Apr 25, 2024 09:57 AM
Margaret Rome Baltimore 410-530-2400
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome

Andrea Bedard

I am a bit late reading this well-deserved featured post! Such a good explanation of how a home is priced. This should be mandatory reading for everyone!

Apr 29, 2024 05:43 PM
Andrea Bedard

Thank you, Margaret! 

Apr 29, 2024 06:32 PM