The single most important factor to consider when selling a house is the home price tag: how much your house is worth. You don’t want to overprice the house because you will lose the freshness of the home’s appeal after the first two to three weeks of showings. After 21 days, demand and interest wane. On the other hand, don’t worry about pricing it too low because homes priced below market value often will receive multiple offers, which will then drive up the price to market. Pricing is all about supply and demand. It’s part art and part science, and no two agents price property the same way.

Pull Comparable Listings and Sales

• Look at every similar home that was or is listed in the same neighborhood over the past six months.
• The list should contain homes within a 1/4 mile to a 1/2 mile and no further, unless there are only a handful of comps in the general vicinity or the property is rural.
• Pay attention to neighborhood dividing lines and physical barriers such as major streets, freeways or railroads, and do not compare inventory from the “other side of the tracks.” Where I live in the Land Park neighborhood of Sacramento, for example, identical homes across the street from each other can vary by $100,000. Perceptions and desirability have value.
• Compare similar square footage, within 10% up or down from the subject property, if possible.
• Similar ages. One neighborhood might consist of homes built in the 1950s next door to another ring of construction from the 1980s. Values between the two will differ. Compare apples to apples.

Sold Comps

• Pull history for expired and withdrawn listings to determine whether any were taken off the market and relisted. If so, add those days on market to these listing time periods to arrive at an actual number of days on market.
• Compare original list price to final sales price to determine price reductions.
• Compare final sales price to actual sold price to determine ratios.
• Adjust pricing for lot size variances, configuration and amenities / upgrades.

Withdrawn & Expired Listings

• Look for patterns as to why these homes did not sell and the common factors they share.
• Which brokerage had the listing: a company that ordinarily sells everything it lists or was it a discount brokerage that might not have spent money on marketing the home?
• Think about the steps you can take to prevent your home from becoming an expired listing.

Pending Sales

• Since these are pending sales, the sales prices are unknown until the transactions close, but that doesn’t stop anybody from calling the listing agents and asking them to tell you. Some will. Some won’t.
• Make note of the days on market, which may have a direct bearing on how long it will take before you see an offer.
• Examine the history of these listings to determine price reductions.

Active Listings

• These matter only as they compare to your listing, but bear in mind that sellers can ask whatever they want.
• To see what buyers will see, tour these homes. Make note of what you like and dislike, the general feeling you get upon entering these homes. If possible, recreate those feelings of reception in your own home.
• These homes are your competition. Ask yourself why a buyer would prefer your home over any of these and adjust your price accordingly.

Square Foot Cost Comparisons

• Remember that after you receive an offer, the buyer’s lender will order an appraisal, so you will want to compare homes of similar square footage.
• Appraisers don’t like to deviate more 25% and prefer to stay within 10% of net square footage computations. If your home is 2000 sq. ft., comparable homes are those sized 1800 to 2200 sq. ft.
• Average square foot cost does not mean you can multiple your square footage by that number unless your home is average sized. The price per square foot rises as the size decreases and it decreases as the size increases, meaning larger homes have a smaller square foot cost and smaller homes have a larger square foot cost.

Market Dependent Pricing

• Same house, three different prices. After you have collected all your data, the next step is to analyze the data based on market conditions. For comparison purposes, let’s say the last three comparable sales in your neighborhood were $150,000. In a buyer’s market, your sales price might allow some wiggle room for negotiation but be strong enough (near the last comparable sale) to entice a buyer to tour your home. To sell in this market, you might need to price your home at $149,900, settling for $145,000.
• In a seller’s market, you might want to add 10% more to the last comparable sale. When there is little inventory and many buyers, you can ask more than the last comparable sale and likely get it. So that $150,000 home might sell at $165,000 or more.
• In a balanced or neutral market, you may want to initially set your price at the last comparable sale and then adjust for the market trend. For example, if the last sale closed three months ago, but the median price has edged upwards of 1% per month, pricing at $154,500 would make sense.

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Before putting a home on the market or listing with a real estate agent, savvy home sellers obtain a comparative market analysis, also referred to in the industry as a CMA. You’ve probably received direct mail letters or post cards from local real estate agents about CMAs. These pitches offer you a free report to tell you how much your home is worth. Sellers use a CMA to figure out home pricing.

What is a Comparative Market Analysis?

Although reports can vary, from a two-page list of comparable home sales to a 50-page comprehensive guide, the length and complexity of the report depends on the agent’s business practice. However, standard comparative market analysis reports contain the following data:

• Active Listings

Active listings are homes currently for sale. These listings matter only to the extent that they are your competition for buyers. They are not indicative of market value because sellers can ask whatever they want for their home. It doesn’t mean any of the prices are realistic. The offered sales prices do not reflect market value until they sell, and in buyer’s markets, for example, most sell for a lot less.

• Pending Listings

Pending sale homes are formerly active listings that are under contract. They have not yet closed, so they are not yet a comparable sale. Unless the listing agent is willing to share information about the pending sale — and many are not — you will not know the actual sold price until the transaction closes. However, pending sales do indicate the direction the market is moving. If your home is priced above the list price of these pending sales, you could face longer DOM.

• Sold Listings

Homes that have closed within the past six months are your comparable sales. These are the sales an appraiser will use when appraising your home for the buyer, along with the pending sales (which will likely have closed by the time your home is sold). Look long and hard at the comparable sales because those are your market value.

• Off-Market / Withdrawn / Canceled

These are properties that were taken off the market for a variety of reasons. Usually the reason homes are removed from the market is because the prices were too high. The median prices of this group will almost always be higher than the median prices of comparable sales. However, listings cancel also for the following reasons:

1. Seller’s remorse. The sellers decided they cannot part with their home and no longer want to sell.
2. Priced too high. Nobody made an offer or the only offers received were low-ball offers, which were rejected.
3. The DOM were too long. Agents sometimes withdraw listings so they can put them back as a new listing and fool buyers.
4. Repair requests. The homes were once under contract and after the home inspection, the buyer requested repairs which the seller refused.
5. Seller fired the agent. It’s not uncommon for unhappy sellers to fire an agent and hire a new agent.

• Expired Listings

This group will reflect the highest median sales price because they did not sell and were probably unreasonably priced. Some of the expired listings could also show up as an active listing, listed by a new agent at a new price. Listings also expire because they were not aggressively marketed or because the home was in need of repairs.

Examining Comparable Sales

Comparable sales are those that most closely resemble your home. It is difficult to compare a tri-level home to a single-story home. Select the homes from this list that are mostly identical to your home in size, shape and condition, such as:

• Similar square footage

Appraisers compare homes based on square footage. Larger square-foot homes are worth less per square foot than smaller square-foot homes. The variance among a group of median-priced homes ideally should not exceed more than 200 to 400 square feet, plus or minus.

• Similar age of construction

Ideally, the age of the home — the year it was built — should be within a few years of other comparable sold homes. Mixed-age subdivisions are common. For example, in one area of Sacramento, a subdivision consists of homes built in the 1950s, and then they jump a couple decades to the 1970s. Although the homes are located next door to each other, the homes loaded with character from the 1950s sell for more than their newer Brady Bunch counterparts. If your home was built in 1980, say, and brand new homes up the street are selling for more, you cannot command the same price as a new home.

• Similar amenities, upgrades and condition

Appraisers will deduct value from your home if other homes have upgrades and yours does not. A home with a swimming pool will have a different value than a home without a pool. A completely remodeled home is worth more than a fixer. Homes with one bath are worth less than homes with two or more baths. Deferred maintenance will count against you.

• Location

Everybody knows that real estate is valued on “location, location, location,” but have you considered what that means? A home with a view of the city, for example, is worth more than a home facing a cement wall. Homes located on busy thoroughfares are worth considerably less than homes on quiet streets. Compare your home to those in similar locations. If your home sits across the street from a power plant, look for other homes with power plant exposure or those located along railroad tracks, among other undesirable locations.

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