When it comes to pricing a for-sale home, realty pros have two words of advice for home sellers: be realistic.
But what does "realistic" mean in the context of the slow sales and falling prices that characterize many housing markets today?
The answer, according to David Moody, a broker at ERA Sunrise Realty in Athens, Ga., is that your home should be priced within the data set of similar homes that are for sale or recently have been sold in your neighborhood. These homes, known as "comparables" or "comps" for short, represent the going prices for similar homes. Pricing yours within this range should attract prospective buyers to your home.
"Realistic, to me, means price it within the data set of the neighborhood that will allow you to get buyer traffic," Moody says. "If you price at the upper end of that range, you may not get any, or only very little, activity."
The condition of your home matters
"Realistic" also means being honest with yourself about your home's condition, since price is a function of condition as well as style, size and location.
If your home is new or has been updated and is well-maintained, you should be able to price it at the higher end of the range. If it's outdated and has a lot of deferred maintenance, be smart and price at the lower end.
"The two biggest factors in selling a home are number one price and number two condition," Moody says. "And you could almost flip-flop that and say condition is number one and price is number two. You have to win the beauty contest and the price war."
If your house possesses a unique characteristic, you might be able to price it a little higher, but only if that characteristic is highly desirable to buyers in the area, according to Allyson Bernard, owner of Real Estate Professionals of Connecticut in Danbury. For example, a home equipped for aging in place would be more desirable in a locale that's attractive to seniors.
Study the comps
When you review your comps, consider how long each house has been for sale, a figure referred to as "days on the market," often abbreviated as "DOM." Homes that are currently for sale, but have been on the market significantly longer than the average DOM in the area are probably overpriced, Moody explains.
Also consider each comp's history. If a house was listed for sale more than once before it was sold or taken off the market, the latest DOM listed could be misleading.
Don't rely on comps that you find on websites because that information might be inaccurate.
Active comps vs. closed comps
The experts say that you should give greater consideration to "active comps"--those currently for sale--than "closed comps"--those which have already been sold.
Bernard explains that while closed comps are based on prices buyers agreed to pay several months ago, active comps represent the current "competition" for your home. If prices have dropped, old comps can prove misleading.
"The Internet has a lot of good information and a lot of bad information," Bernard warns. "Vet the information you get with your Realtor, so you'll know what's real and not real, or actual and not actual, in your market."
Consider these factors as well
Home staging: Hiring a home stager can enhance your home's appeal, but don't count on staging to deliver a higher price.
"Staging is not necessarily going to make it worth more," Bernard says.
The appraised value: Your home's appraised value might be a valid concern, since a buyer might demand a discount if an appraiser's opinion falls short of the agreed-upon purchase price.
But Moody says you should cross the appraisal bridge during the transaction, not as part of your pricing strategy. So appraisal concerns aside, your price should be low enough to generate buyer traffic, yet not so low as to leave money on the table.
"I would rather our sellers take the risk that [the house] might appraise for what a willing buyer would be willing to pay," he says, "rather than trying to reduce [the price] and then the seller suffers some loss of equity."
The bottom line is that, as a seller, you have to price your house realistically or it won't sell in today's market.
"It's not a market in which the seller is in charge and can take a piece of spaghetti with a price attached to it and throw against the wall and see what sticks," says Bernard.
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Marcie Geffner is a freelance real estate reporter and writer whose news stories, features and columns have been published by dozens of newspapers, magazines and Web sites. She is a former managing editor of Inman News, senior editor of California Real Estate magazine and board member of the National Association of Real Estate Editors (NAREE).