Choosing the sale price for your home is an important decision. Price it too low and you can leave money on the table. Price it too high and it could take months to find a buyer.
Whether you are working with a real estate agent or selling a home on your own, researching the right sale price for your house is a good idea!
Step 1. Price your home with an Automated Valuation Model (AVM)
An automated valuation model (AVM) calculates a home’s value by applying a statistical model to a database of existing homes and recent sales of similar properties. It provides a fast and reasonably accurate estimate of a property’s value. Real estate agents may have their own AVMs. You can also check homebuyer sites such as Zillow and Trulia.
Step 2. Price your home by looking at comparable properties
Next, look at comparable properties. These are similar homes in your community which have sold in the recent past. Real estate agents usually have good information on comparable properties and use them to understand the value of your home and how much current buyers may be willing to pay for it. Factors that influence whether a house is considered a comparable property to yours include:
- Location: Comparable homes should be within a half mile to mile radius of your home when you live in a city, town, or suburb. Homes in rural locations will likely have a larger radius.
- Size (square footage): A comparable house should have the same square footage as yours, plus or minus 10%. If your home is 2,000 square feet, look at houses with square footages between 1,800 and 2,200. Also consider the size of the lot on which the house is built.
- Bedrooms and bathrooms: The house should have an equivalent number of bedrooms and full and half bathrooms.
- Age and condition: Newer and better maintained homes are generally more valuable than older homes that need repairs.
Use the information you get from researching comparable properties to adjust the initial price you got from an AVM. This information might increase or decrease your sale price.
Step 3. Consider the specifics of your house when setting the price
Next consider the characteristics of your home that may not be captured in your comparables research but which will be obvious to buyers visiting your home. These include:
- Major renovations and remodeling: If you have a brand-new kitchen, newly remodeled bathrooms, a basement family room or finished attic, you can often charge more for your home.
- Updated systems: A new roof, a new HVAC system, new plumbing or electrical, and new windows and doors all can increase the value of your home. New appliances don’t hurt either.
- Finish and amenities: Fresh paint and carpet, custom closets or bookcases, and other touches can help the sale price of your home.
You should also consider lowering the sale price of your home when you have an old kitchen and bathrooms or old systems that will need replacing soon. That’s because buyers will look at these as additional expenses they will need to consider in addition to the price of the home.
Step 4. Look at the housing market when choosing a sale price
Next consider the housing market in your community. The current market might allow you to increase the price of your home or force you to decrease it. Consider:
- Inventory levels: When there are a lot of homes available, you might have to lower your price. When few homes are available, you may be able to increase your price.
- Home price trends: Look at whether sale prices have been increasing or decreasing in the past few months. You may need to react to these trends.
- Mortgage rates: High rates make monthly interest payments more expensive, which lowers the price of houses buyers can afford. Low mortgage rates can give you more room to increase the price of your home.
- Seasonality: Traditionally spring and summer are the times of greatest homebuying activity. When more buyers are actively looking, you can usually ask for a higher price.
Real estate professionals can talk about buyers and sellers markets, in which the factors above give an advantage to homebuyers or homeowners when negotiating a sale. When conditions do not favor either side, this can be called a balanced market.
Step 5. Decide how fast you want to sell the home
Homes that are reasonably priced usually sell faster than homes where the owners want a high price. Decide how quickly you want to sell your home and adjust the price accordingly.
Step 6. Set the sale price for online searches
Most people begin shopping for homes online, and searching by price is one of the most popular ways to do it. As a result, pick a sale price for your home that falls in a range homebuyers often choose.
For example, buyers might search for houses that cost between $300,000 and $350,000. Your home will appear in results for these searches if you price it at $349,000 but probably won’t appear if you price it at $355,000 – even though there is a small difference between the two numbers.
*Freedom Mortgage Corporation is not a financial advisor. The ideas outlined above are for informational purposes only, are not intended as investment or financial advice, and should not be construed as such.
Last reviewed and updated January 2023 by Freedom Mortgage Corporation.