How to Set a List Price for Your Home

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How to price your home to sell?

The listing house formula developed by Coffee Real Estate to correctly set the home’s selling price is the best way to calculate the price. The Comparative Market Analysis or CMA is a standard real estate tool. The Broker Price Opinion or BPO of Value is a more in depth view of the data along with other value factors that can have a big impact into the selling price and even the sale ability of the property. These two standard approaches are good for general real estate market data but fail to provide the correct listing price for the individual home seller. Coffee Real Estate’s listing formula is designed to give the home owners the best chance of achieving their goal of a house sale.

Coffee Real Estate’s listing formula is the best way to determine how to set your home’s listing price.

Coffee Real Estate’s listing formula contains all 3 elements of a home listing price.

  1. Listing Price
  2. Market Price
  3. Seller’s Goals

How do real estate professionals determine how to price a home?

Coffee Real Estate’s listing formula is the best way to set the price of your home. Everyone’s house should be priced to meet the seller’s needs and wishes.  The Coffee Real Estate listing formula is designed to meet that goal.

Coffee Real Estate listing formula

Listing Price = Market Price + Seller’s Goals

Market Price

The market price raw data is derived by the CMA, BPO, Appraisal research and an automated algorithm like Zestimate.  Each one of these methods approaches the real estate market differently. Therefore the market price arrived at by these processes will be skewed to their purpose.

Seller’s Goals

The seller’s goals impact price in many ways. But they can be grouped into three categories. The first group wants to sell the property for the highest possible price. The next group wants to sell the property as fast as possible. The third group needs to sell the property in “as is” condition.

Who sets the listing price of a property?

The seller sets the listing price. The FSBO seller does the process on their own. The traditional home seller uses a realtor to give them insights into how to set the price. The home seller who works with a real estate professional will have their reasons why they are selling be part of the home price strategy.

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Home pricing strategies

For many buyers the price is the single most important factor. If the property is overpriced, it will lock out possible buyers. Pricing really is all about supply and demand. It is also an art form that has data points, marketing issues, house appeal, money supply, local subjects and a few specialized matters all mixed in to help establish a listing price.

The right listing price is formed by the seller’s goals.

The 3 main goals of sellers are the top dollar price, fast as possible and the “as is” condition seller.

  1. Selling your house for the maximum price is generally the most important aspect to the home owner. The highest possible price for your home is met by finding a retail home buyer. Coffee Real Estate will work with you to navigate today’s real estate market to achieve the very best price. This is how to price your home to sell for top dollar.
  2. Selling the house fast is done by marketing the house with an under market price to retail buyers or priced to attract investment buyers. How fast a property sells is frequently just as important as price. Getting the mix of speed and price is the art of marketing your house.
  3. Selling the property in “as is” condition is not just about a lower price but finding the best buyer for the actual condition of the property. If it is a light fixer we can market the house to home buyers who are DIY people. If it is to clean out a hoarder property the buyer pool is the fix and flip or rental investors. Hoarder houses are a big problem, but if the buyer has experience with that type of house it is just a number to them. If the property is a heavy remodel, the market is professional risk takers or the uninformed buyer (the money pit buyer).

“Before the “For Sale” sign goes up. The listing price positions your home to attract qualified, prospective buyers.”

Dan Parisi – Real estate professional

This is how to get the real estate market data or current selling prices of houses.

1. Comparative Market Analysis (CMA):  The comparative market analysis is generally called a “CMA”. Anyone can create a CMA. No training, certification or license is required. CMA’s are done quickly with the most general real estate market data. The lack of standards make CMA’s from an untrained person of very little value or accuracy.

Some real estate professionals have strong individual standards that create the discipline needed to gather and evaluate the data to achieve a quality CMA market value report. The recently sold homes in the past six to eight months with similar square footage and in the same area will aid in setting the selling price.

Listing price vs selling price

During the real estate market data gathering the evaluator will view the selling prices of the house in the area. The difference between the listing price and selling price is one point of the data. So the listing price is the price the seller is asking for. The selling price is the actual price the property sold for.

Real estate agents can perform a market analysis to help establish a listing price by also looking at the properties currently for sale. This process takes into consideration the comparable prices of current homes on the market. These are the competitors for your home sale in the area. 

The real estate professionals will also pull comparable homes sold along with a listing history that can help determine the best pricing. With enough comps, short hand for comparable, the process to determine the relationship of listing price to actual selling price takes shape.

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Listing price vs selling price

During the real estate market data gathering the evaluator will view the selling prices of the house in the area. The difference between the listing price and selling price is one point of the data. So the listing price is the price the seller is asking for. The selling price is the actual price the property sold for.

2. Broker Price Opinion (BPO): The Broker Price Opinion generally called a “BPO” is a formal valuation by a licensed real estate agent. To be qualified to do a BPO an individual must get training, pass a professional BPO origination test to receive a certification. This guarantees that BPO’s are done to a standard. The process creates standards of gathering the data, verifying the data, evaluating the data, a process to arrive at a real estate market value and written report standards to insure that a BPO’s value is valid.

3. Real estate appraisal:  The licensed real estate appraiser has very demanding educational standards, experience, continuing education and testing procedures to achieve the title of real estate appraiser. The Bureau of Real Estate Appraisers (BREA) in California requires a Bachelor’s Degree plus many hours of professional education just to begin the process to become a licensed real estate appraiser.

The licensed real estate appraiser has the best systems, training and experience to form a real estate market price opinion. They are very thorough. They have rules handed to them from the government, lenders and trade unions. Appraisers know that the value they establish will be used in courts, and by lenders and investors. They do not take their responsibility lightly.

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The only negative is that a licensed appraiser is not active in the real estate market place. They look at data. The real estate agent that talks to sellers and buyers gets a personal view of the market place and individual properties. This is why some properties sell substantially above their appraised value. The individual assesses value to the property that the appraiser with their data set cannot evaluate.

The appraiser’s assessment of the data impacts the ability of a buyer to get a loan which influences the price of the property. So the rules set by the appraisal originations impact real estate prices by dictating how an appraiser derives the opinion of real estate value. They stipulate which data to use and how to evaluate it. The market place is not the only determiner of real estate prices. The real estate appraisal method impacts prices by limiting the value of the real estate property.

mls cma algorithm

4. Algorithm estimate of value: An algorithm with today’s technology can generate a CMA with public data in microseconds. This value is an automated valuation model calculated by a software process. An algorithm house value can incorporates public, MLS and user-submitted data into a proprietary formula, also taking into account home facts, location and market trends. Zestimate is the most well-known. I use the algorithm generated my local MLS Metrolist. Here is the link if you want to see what value it gives for your property.

Data overload is a real issue with today’s real estate buyer and seller.

One of the features of listing price setting is how to deal with all the data. Information overload is a very real possibility. Not only is the amount of facts and figures large but they can be showing different insights. The data can be giving a mixed message. Some data can be showing a strong real estate market. Other data can be portraying a slowing or down trend. The general housing market can be weak but the price point of your property can be strong. The Sacramento real estate market is general a strong market.

Not all data has the same value to the decision of setting the listing price. The ability to properly weigh the data will give the best listing price.

One useful way to view this issue is that the market price sets the ball park price. The seller’s goal sets the acceptable price. And the marketing plan to reach the seller’s goal sets the listing price. In the end of this process the listing price is a marketing tool.

The elements that go into the real estate market data

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Some of the areas of information for a listing price evaluation are the location of the property, square feet of living area, style of house, the layout of interior, landscaping, age of house, updates and/or if remodeled, number of bedrooms and bathrooms, kitchen area, living areas, CC&R’s, HOA’s, tax issues, the neighborhood, condition of subject property, condition of comparable properties and other individual issues. 

Potential buyers will also be considering these comparable figures when they look at your home or formulate an offer, so give the information careful consideration.

The conflict of house values and differing prospective issues are a difficult aspect of the list price.

Establishing a property listing price is both an art and science. The science comes from working with the 4 methods to attain market data which ranges from a very simple to very complex set of variables. The art comes from experience, understanding the current real estate market, comprehension of the property function and aesthetics, financing and seeing the whole in real time.

Dan Parisi Coffee Real Estate Sacramento

Real estate professionals understand the property value because of their human interface. This is the basis for the conflict of appraiser versus the sellers, buyers and agents. Each thinks they know the right way to value real estate.

The sellers, buyers and agents all feel property is worth what a willing seller and willing and able buyer agree to. And if the transaction is for cash only, then that is true. But when a lender is involved, then the lender wants proof of value. They gain that proof by a licensed real estate appraiser for the most part.

I have told listing clients that I could sell it for the price they want. It is a fair price. But it will not appraise that high. Therefore the buyer cannot get the loan to purchase the property. This makes setting a listing price more complicated than it first looks.

The simple approach to list price does not always work.

The simple approach is to set the price high for the sellers who want top dollar and set the price low for the fast and “as is” sellers. Unfortunately the real world is seldom simple. Current real estate market conditions, supply and demand issues, condition of the house, style of the home, special features, the lending environment, time of year, the state of the economy and many other macro and micro issues come together to impact the listing price.

Setting the listing price is the single most important factor to sell a house

Setting the home price can be the hardest part about selling.  Set the price right and the property sells. Set the price wrong and the home may not sell at all.

Price is the single most important factor for many buyers to consider first. If the property is overpriced, it will lock out possible buyers. Also after the first 21 days on the market the home’s “freshness appeal” will have diminished. But just because a home is priced below comparable market value does not guarantee it will be sold quickly.

Coffee Real Estate FREE evaluation service

Coffee Real Estate will go beyond the standard Comparative Market Analysis or CMA and establish a Broker Price Opinion or BPO of Value. This process will establish the best selling price along with the seller’s goals to equal the listing price. Call, email or use the form to invite us to evaluate your house, share marketing ideas, home staging thoughts and the process to sell your house. But by asking us to help establish your home listing price we will give you a FREE listing price evaluation.

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