Step 2.  What is my home worth?

To be blunt, your home is worth what a buyer is willing to pay for it.

To you, the seller, your home is full of the love and many weekends of hard labor. Your beautiful kitchen and bathroom upgrades. Those shiny restored oak floors. Your Sunset Magazine worthy garden and the deck you added with the help of your neighbors. Once your home goes on the market, however, buyers will view it as just another home on the market, competing against all the other homes already out there.

For the majority of sellers it is very difficult to let go of the emotional attachment to their homes. The selling process will be less stressful if you are able to start viewing your home in the same light as your prospective buyers. Stand back and put yourself in the buyers' shoes. What do you see? Remember how fussy you were when you purchased the place?

The price at which your home might be listed on the market is based on a method referred to as a comparative market analysis.

Comparative Market Analysis (CMA)
Obviously, you don't want to just put up a for sale sign, wait for offers and then try to decide "is this a fair offer?"

When you are working with a real estate agent, they will put together a comparative market analysis of your home. They will give you their best estimate of how much your home is worth in today's market. Note that the CMA is an estimate, not an exact science.
The agent will base his or her estimate of your home's market value on properties that are similar to yours and that have sold in the past six months. Ideally, these properties will be right in your neighborhood. The agent will need to make adjustments for factors such as differences in the number of bedrooms. Note that homes that are currently for sale cannot be used in a CMA because those homes may not actually sell for the listed price.In the case of less common properties such as a brick Tudor, the agent may have to use Tudors form another neighborhood and make adjustments for that fact. 

When trying to sell in a buyers' market, you need to have realistic expectations of what your home will sell for. If you have had your home for, say, five years, you will have built up some decent equity. Don't focus on the fact that you won't be getting every last dollar of what your home was worth back when the market was peaking. You should still end up with a nice return on your investment.

Just because an agent comes back with a certain listing price does not mean that you have to agree with it. However if you demand that the price be increased too much and are not willing to compromise, the agent might not be interested in taking the listing. He or she might believe that the home will never sell at that price and that they do not want to waste money out of their own pockets paying for for-sale signs, flyers, gas, advertisements and potentially staging the home.  Having said that, any agent should be flexibility in deciding on a list price.

If you would like an analysis of how much much your home is worth, please click here.

Be wary of high listing price "flattery"
Consider a situation where you are screening three different agents to list your home. Two of the three come back with CMA's that are similar. The third one quotes a listing price that is considerably higher. The natural reaction is that the third agent must be correct.

Be careful. This agent may be trying to "buy the sale" by winning you over with a higher listing price. On the reverse side, they may be completely correct. However if two other agents independently come up with similar pricing, their estimates are probably more reliable.

If you go with agent # 3, you might be lucky and your home sells for that higher price. However, the more likely scenario is that your home could potentially sit on the market for months while comparable homes are selling. You then start cutting the asking price until you are back down to what the other two agents were quoting. By this time, your home has been on the market for a long time and has become "stale".

A lot will depend on market conditions. Some years you might have a bidding war, even on overpriced properties. Today, we have gone 180 degrees. Homes are selling more slowly and as a seller, you may have to reduce your expectations and accept reality. Everything goes in cycles though and sellers will be the ones doing the grinning.

Adjusting the listing price
Depending on the prevailing market conditions, you should be prepared for the possibility of having to reduce your listing price. If no one comes to view your home in the first few weeks, either your home is not particularly appealing or it's overpriced.

Having to reduce the listing price can feel like you are throwing money away. However, remember that a CMA is only a good estimate of what your home is worth.  It is only when your home goes on the market that you get feedback on how good that estimate is. Keeping your home at the initial listing price for an extended period can lead buyers wondering to themselves "what's wrong with that home?".

Your objective is to sell the house as fast as possible for the best possible price. In a buyers' market, that might be difficult. Being patient and having realistic expectations will go a long way towards reducing your stress levels. 


Continue to Seller's step 3.  Go solo or go Realtor?


Return to Seller's step 1.  Have to sell?