Selling: 1. Price Your Home Properly

The Most Important Thing To Do is To Price Properly!

An overpriced home can cause buyers to have false perceptions:

• Is the seller ridiculously greedy or unrealistic?
• Will the seller not negotiate?

In FSBOs, both the buyer and the seller expect to make money, sharing in the savings of working without agents. The best FSBO asking price comes from the comparable market sale value of your house, then subtract 2 to 3% (about half the commissions). See the numbers on the previous page for an example of how this works.

A lower priced house will sell faster, saving you time and making more money! Agent listed houses, on average, actually sell at an amount 5% less than the asking price. You could price your home almost 8% less than the asking price of houses around you, making it very attractive to buyers - and you still come out ahead in time and money. We suggest that you do not advertise your home at a "5% higher" asking price, see below for details.

This is very, very important and bears repeating... your house is only worth what a buyer will pay for it. If you seriously DO want to sell your house, 1) Find out the market value; then 2) Subtract 2.5% and list it. Do not try to play the game of pushing up the asking price - it will only reduce the number of inquiries and draw out the process - costing you time and money.

How to get the current market value of your house

To obtain the current market sales value, you will need the sales prices of comparable homes in your area within the past six months. These amounts are then adjusted for age, condition and size relative to your own home and averaged.

From An Appraiser - Most Accurate. $250 to $500
It is the business of an appraiser to have up-to-date county tax records and MLS sales information, and their in-person appraisal will account for major upgrades to your house. Appraisers have precise formulas from nearby similar sales to equate in terms of age, size and condition - giving you an accurate sales price in one step. TIP: To buy your home, you had to get an appraisal; You should contact the company who did that appraisal and ask them for a "drive-by" appraisal which will be non-binding for any legal purposes; this should cost only about $250 as opposed to around twice as much for a full appraisal. See a list of Santa Fe Appraisers, or the Appraisal Institute.

From A Real Estate Agent - Easy, Fast & Free. Not as Accurate.
Another way to get a Competitive Market Analysis or CMA is to actually just ask a real estate agent. It's OK to tell them that you're selling your home FSBO. For the reasons listed to the right, the real estate agent will probably assume that more than likely, you'll be a future client of theirs so they'll be happy to help. A CMA may not be accurately adjusted to your particular home and may be inflated to agent asking prices.

From The Internet - Least Accurate
Recently, the website Zillow.com has begun to aggregate national sales information and provide their own formula for approximating sales values in your neighborhood. Pricing is based on available sales data and nation-wide formulas, so may not be highly accurate for your house. We've found 'Zestimates' can be a little high for some parts of Santa Fe, and that Zillow tracks (or at least displays) few actual recent Santa Fe home sales - hopefully this will soon change. There are other online "Automated Valuation Model" tools, but these too are less familiar with the Santa Fe area in particular.

Adjustments
All appraisals are making assumptions about the age, quality, construction, amenities, appliances and upkeep of your home. If your home has expensive tile, a custom patio or a hot tub, those should be taken into account as possible increases to the sale price but their value should be discounted. Most items that you wanted to install do not add their full cost of purchase onto the price of the home.

Minor Structure
There are other cosmetic features that will affect the buyer's perception of your home value - but generally do not affect the price. You may be asked to address them in purchase agreement amendments after the buyer's home inspection. Structural condition is most important - items such as walls, ceilings, floors, doors and windows. Then paint, floor coverings and yards.

For more information and assistance, see our Frequently Asked Questions For this Page,
plus a list of Santa Fe Appraisers

Frequently Asked Questions for this page:

Q: Regarding "Typical 5% wiggle room" can you explain why I shouldn't price my house higher, because I can probably get more money?
A: Sure! The 5% decrease from asking price to sales price typical of agent-listed homes is an average of all homes. You'll find that other FSBO information may tell you to keep the 5% amount in the asking price of your home, but the problem with doing that is then you WILL need to wiggle down through negotiations and amendments with the buyer. We suggest you take the 5% off and then 2% off of the resulting number so that your home is already priced down the average amount that you'd negotiate to anyway. This can significantly speed up the sales process because you explain to your buyer that the asking price already contains discounts for anything that they object to - and which you wisely planned for in advance. The buyer may be somewhat frustrated that you're not conceding additional money off of the sale - but you've already factored that into your price. Setting the correct, firm asking price that is the same as the sales price is both honest and allows you to sell your home fast and easy. Price your home once, accurately and honestly, and then forget about it.

Q: Why can't I keep my asking price the same as the market sales value, and therefore get all the commission saving myself - I'm the one who has to pay the commissions out of sellers money in agent-listed transactions anyway?
A: Three reasons!
  1. Buyers of FSBOs know exactly the savings involved in going FSBO - and they won't be willing to pay the same price as other homes on the "agent" market - don't try to compete!
  2. By sharing the savings in FSBOs, your house is most competitively priced and will probably sell much faster! You do not want to make a career out of selling just one house!
  3. While it is said that the money "comes out of" the sellers closing statement, which is true - the buyer is still the one who has to get the financing and pay back the loan, with interest.
Additionally, if you note in our FSBO Formula, we suggest that you don't have to completely remove 3% off of the comparable market sales price - removing 2% is slightly in favor of the seller, who is the one who has made the initial decision to go the FSBO route.

Q: If everybody starts selling FSBO, then the market sales value is lower than it should be - do I adjust my asking price differently?
A: While we'd love to change the world, a significant portion of the market will probably always be represented by agents - for people unable, unwilling or uninterested in handling the sale of their own home. We try to keep sold houses on this website for at least a month after the sale - so if your comparable houses listed in your appraiser's report also appear on this or any other FSBO site, then you know the price was already correct - and you don't adjust down for it. You only adjust down the prices of homes sold with agent commissions as part of the sales price - and even then you only adjust down by about 2 percent from comparable sales price.

Q: Could you spell it out for me, what exactly is this magical FSBO formula?
A: Take your average, comparable agent-listed market sales price, adjusted for size and condition of your house. Adjust slightly up for improvements or slightly down for age or structure issues. Subtract two to three percent. That's your asking and sales price. No mess, no fuss, no haggling. Advertise that price as firm and as below market value or below appraisal. The masses will flock to buy your house!

Q: The market's hot right now, can't I price my home higher?
A: While the market certainly swings up and down, most of the time it's actually relatively stable. If you've got "a seller's market," or high demand and low supply - then you can consider pricing your house a little higher. If you stick with the FSBO formula, you could instead get into a bidding war (because your house is high demand, priced below market - you may get many simultaneous offers) and then the sales price of your house could go up much higher. The bottom line is that your house is worth exactly what a buyer is willing to pay for it... what you want to get out of it or what you think you can get out of it don't really matter.

Q: I've set my home sales price, but now my buyer has a buyer's agent - what do I do about the 3%?
A: There are two ways to handle this, and you should definitely speak with your title company or real estate attorney. The easiest way may be to insist that a clause in the purchase agreement stipulate that the buyer is responsible for paying their own agent, and that it will not come out of monies received by the seller. Another method may be to increase the sales price of the home, either in the agreement or in an amendment, to include enough money for you, the seller, to pay 3% out of your monies received to the buyer's agent and still get your asking price back to you. For the latter, to arrive at the correct dollar amount, take your FSBO asking price and divide it by 0.97 to get the larger number with a buyer's agent commission added in.

Q: You can't possibly be serious and expect me to split the commission savings with the buyer - most of the additional work required in FSBO transactions has to be done by the seller!
A: It is certainly true that there is additional work that needs to be done by the seller in a FSBO transaction. However, there are several arguments in favor of splitting the commission. First, it's almost certain that you bought your home for far less than you're selling it now - so you're making money any way it's sliced. Second, after selling FSBO, you are very likely to go out and buy a home FSBO - it's not reasonable to expect to win at being greedy on both sides of the equation. Third, discounting the sales price by 2% gives you twice as much advantage in the transaction as the buyer, or leaves room for a little bit of negotiation. Fourth, it sounds like maybe you haven't sold a home before - the amount of document preparation, communication, fixing up and continuous cleaning is your responsibility even if you're selling with an agent. Lastly, the bottom line comes down to whether you want to sell your home quickly and make money, or whether you want to "feel that you're right" while you sit on mortgage payments and no offers come in. Remember, that you as a seller are paying off bills and walking away with a check... the buyer is assuming a large debt and payments.

See all frequently asked questions