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How Does a Real Estate Agent Determine the List Price for My Home?

Real estate agents compare your house to adjacent properties that have recently sold.

Agents will also examine the present market competition

Different agencies may propose varying prices.

There are also various techniques to evaluate the worth of your house on your own.

What Is the Ideal Asking Price for Your Home? It Depends

How does your area’s greatest real estate agent determine the selling price? It’s not magic, but a great deal of skill and expertise is required.

Consider the premise that there is no list price as a starting point. Different brokers, according to their unique viewpoints, may provide varying valuations. Important for property owners is to comprehend why a broker proposes a specific price.

In a listing presentation, brokers will provide owners with a Comparative Market Analysis or CMA. The CMA will include the following:

  • The suggested sale price.
  • Its justification.
  • A marketing strategy describing how the broker intends to sell the property.

CMA Presentations

CMAs were once brief reports sent by brokers to property owners. Not anymore. CMAs are now prepared by sophisticated software that can analyze previous sales and currently available properties.

They can display average and median selling prices, price revisions, local minimum, and maximum sale prices, days on the market, individual closed sales, houses that were listed but did not sell, the optimal time to sell, the effect of overpricing, and more.

According to the National Association of Realtors (NAR), 74 percent of property owners contacted a single broker before advertising their homes in 2017. This may need to be more prudent. As with any expensive product or service (such as a mortgage), it pays to shop around and evaluate the services of many professionals. And commissions are negotiable.

BPOs and Appraisals

In assisting clients with purchasing and selling houses, real estate agents will commonly recommend prospective values using a CMA. In addition, a lender or other party may ask a broker to appraise a property using a Broker Price Opinion or BPO.

A BPO is not an assessment. Only licensed appraisers may create an appraisal, which is an independent value assessment. In certain areas, brokers may not offer or charge for BPOs.

A CMA is not an appraisal either. For example, Maryland mandates a CMA disclosure statement. “This analysis is not an evaluation,” the notice states. Its sole aim is to aid buyers or sellers, or prospective buyers or sellers, determine the listing, offering, or selling price of real estate.”

Consider that less-respected agents may provide a CMA with a higher price to get the seller’s business. After receiving the ad and waiting a few weeks, they might convince the seller to accept a more reasonable price. Do not automatically choose the realtor who estimates your home’s highest value.

Goals of the Best Real Estate Agent

Multiple objectives are pursued by respectable brokers when setting a listing price.

They desire a quick sale of the house. The value of a property that languishes on the market is likely to decline. And no commission is earned if a house does not sell.

They wish to avoid undervaluing the property. That is detrimental to the seller’s interests.

The brokers wish to avoid overpricing the house, as doing so may deter prospective purchasers and cause the property to languish. Occasionally, owners desire a greater value because they view the asking price as a reflection of their stature. Therefore, determining a sales price requires more than just brick-and-mortar knowledge.

Homes represent who we are and have much to do with ego, status, pride, image, and other subjective characteristics. Due to these factors, the seller may want a certain price for the property. Not because the property is worth the seller’s asking price but because a neighbor or rival paid that amount.

Comparing Your Home to Your Surrounding Area

When assessing the value of a property, a broker will make price modifications. You may have a property with 2,100 square feet, while a comparable property may have 2,300 square feet. You may have two and a half baths, whereas a comparable home has three. Etc.

Some variances do not correspond to square footage or feature-based price modifications. A seasoned local broker knows that sales prices from previous transactions could be more precise. Certainly, the house next door “sold” for $400,000, but the seller had to purchase expensive kitchen appliances.

That is not reflected in the sales data. Neither does the two percent “seller contribution” that the owner paid at closing. Understanding how transactions are negotiated provides seasoned brokers an advantage.

Mortgage Lenders Also Take Pricing Into Consideration

The pricing must be appropriate for attracting buyers as the transaction continues. For example, lenders will finance a property based on the lower sale price or the appraised value.

An excessively high sale price might cause complications. The buyer may need to provide additional funds or the seller to accept a price drop. Or either.

How reasonable are recommended prices? Sixty percent of postings sold in 2017 without a price adjustment, while 22 percent had only one price adjustment.

Sales Price

In the real estate industry, it is acknowledged that each property is unique. Each one is unique. Even seemingly similar properties, such as two identical townhouses, contain subtle differences.

Standard practice in residential real estate is to examine surrounding properties that are now on the market or have just sold. Examining comparables may appear simple, but there is more to it than meets the eye.

A property with attractive landscaping is more marketable than one without. Appearances matter.

Typically, modernized properties are more valued than their original counterparts. They may provide reduced utility and operation expenses.

Realtors want prospective buyers to see themselves in the home. Ineffective is garish hues and unusual decor.

Condition is important. It is simpler to sell homes when the owners have invested in repair, paint, and upkeep. And pricing.

Getting a Better Price

Sellers and listing agents desire their properties’ greatest prices and most advantageous terms. In this regard, it is beneficial if the property is in “show” condition, i.e., clean, repaired, freshly painted, etc.

In addition, it makes sense to eliminate non-movable things to give the illusion of additional space. This can be accomplished through donations, yard sales, and special garbage pick-ups.

Price of the Listing and the Airbnb Factor

Residential real estate, or houses, is where we reside. What if, however, dwellings also generated income?

We’ve always had a guest house, basement, and attic rentals, but we now offer Airbnb-style short-term rentals. If you currently provide short-term rentals, you must consult with brokers to see whether or not such money is factored into a CMA.

Short-term rental income and how it should be counted highly depend on where you reside and what local regulations permit.


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