Research the market before setting the price!
Intelligently setting a list price is a crucial part of the process, whether you are selling as a For Sale By Owner, Listing with a Flat fee MLS Listing Service or retaining a Full Service Real Estate Agent. If the property is priced too low, the risk of attracting low quality Buyers or investors who are likely to submit low ball offers greatly increases and you are less likely to receive an offer at or above market value. If the property is over-priced, the risk of scaring away prospective Buyers increases due to the implication that you have no flexibility and may be difficult to work with. Additionally, over-pricing the home may lead to your property sitting on market until you drop the price to the point where it becomes stale on market and you are less likely to receive an offer at or above market value.
Sellers who retain a licensed Rel Estate Appraiser have additional leverage when negotiating. While the Buyer’s lender will not be able to use the same appraisal, the Seller can list it just under appraised value and reflect in their remarks “Priced below appraised value” as a strategy to increase activity and offers. The average cost of an appraisal in Ohio is $500. Real Estate professionals can provide Realist Reports or a Comparative Market Analysis (CMA) as well. Realist reports include properties that have sold inside and outside the MLS system, whereas a traditional CMA only includes properties that were listed in the MLS. Online estimates such as Zillow’s “Z estimate” may offer additional insight for your consideration.
In reviewing comparable sales, it is imperative that you focus on homes that are similar to your home and incorporate the following criteria:
Distance. Start looking for properties that are within a half mile of your home and branch out as needed.
Subdivision/Neighborhood. Appraisers are required to look at comparable sales in the same neighborhood. If you try to use properties from newer developments outside your own, you are likely to have appraisal issues down the road. If your property is a condo or townhouse, be sure to utilize comparable sales within the same community.
Recent Sales. While comparable sales within the past 6 months are preferred, an appraiser may find it necessary to look within the past 12 months if there are not enough supporting comps available.
Finished Living Space. Finished living space above grade is given additional value over finished living space below grade.
Age. It is important to facilitate research with like kind properties built within the same time period. For example, an appraiser will not use the comp of a home build in 2023 when appraising a home build in 2000. Additional latitude is given when comparing centurion homes.
Lot Size. Select comparable properties with a similar lot size.
Bedrooms/Bathrooms. Count the number of bedrooms and bathrooms above grade. An appraiser is unable to consider a room below grade as a bedroom if it does two points of egress (a separate bedroom door and an egress window), as those are crucial bedroom requirements.
Renovations and Upgrades. Homes that have been renovated or upgraded tend to sell faster and for a higher price.
Amenities. Additional value is given to homes with certain amenities, so be sure to focus on like kind properties.
While active listings are a helpful indicator, homes that have already sold will provide you with guidance as to setting a listing price and determining whether you need to be negotiating appraisal gap language into your purchase agreement. In markets where there are an abundance of homes on market – consider pricing a little lower to attract Buyers. In markets where there is little inventory and homes are selling very quickly, consider pricing to capture rapidly appreciating value.