Determining a home’s price isn’t just about crunching numbers—it’s an art that requires market insight and expertise combined with a brushstroke of strategic finesse. Attention to detail and your agent’s knowledge of the local market are crucial in achieving the perfect balance necessary to bring the masterpiece to life. So, how does your listing agent determine your home’s price?
There is a pie of factors that help determine the value. The largest piece of that is the comps or comparable properties. Keep in mind that this is not a one-size-fits-all approach. To pull and decipher comps successfully, your agent must be fully immersed in your local market daily. This is important because comps should be carefully selected and adjusted according to the neighborhood’s unique characteristics. They need to know what a potential buyer might deduct or add for these factors, which include school systems, street location (a property East or West of a particular street is a different market), and neighborhood nuances, all of which contribute to the property’s value. For instance, if you hired a suburban agent to sell your super modern home in Roscoe Village, they won’t know that a typical Roscoe Village buyer isn’t interested in modern finishes, which needs to be accounted for in pricing. Another example would be adjusting for schools in certain neighborhoods where the majority of families send their kids to private school vs. neighborhoods where the public school is more of a priority. Local knowledge of your neighborhood is everything.
Because real estate markets are dynamic and change daily, factors such as interest rates, seasonal trends, and election years all influence the pricing strategy. For example, spring holds higher demand, whereas the summer months cut the market demand in half. So, pricing should align with the timing in which your home is going on the market. It’s also important not just to consider closed sales. Active and contingent properties tell the story of today’s market, whereas canceled properties tell a unique story of properties that didn’t sell. When considering comps in the area, your agent will closely evaluate these properties, asking questions to determine activity, such as: have they received offers? Why might it not be selling? What are the outliers that will help the agent understand what might be missing (is there a gas station right down the street?). Closed comps are only as valuable as an unchanged market. For example, a comp from six months ago when interest rates were lower and the market was hotter will do little for pricing your property today.
It’s essential to approach pricing strategically. Does an agent price at $500,000 or potentially $499,900? I like to price on the quarter, a nuance designed to capture a specific number of a particular buyer. This directly impacts the home’s visibility on the internet. Most buyers have searches set up online and we want to fall into the right buyer’s search criteria. Overpricing a property can land in the wrong buyer’s search criteria, thus leading to prolonged market time and potentially lower final sale prices.
In summary, determining the listing price for a property isn’t just a number game. It’s a multifaceted process that demands a deep understanding of the market, neighborhood dynamics, and buyer preferences. By combining market smarts, nuanced considerations, and data, real estate agents can master the art of pricing to effectively meet seller goals and maximize your property’s potential, ensuring that your home is positioned for success in the market.
Written by Hayley Westhoff