There are at least eight factors that influence an agent in setting a price to list a home at.
1. Comparable listing and sales in the area. These are similar homes in the same neighborhood that were listed or sold within the last six to twelve months. Usually, homes no further than one-quarter to one-half a mile from your home will be looked at. Knowledge of the neighborhood is essential here. In some neighborhoods, there are those invisible dividing lines between the desirable and undesirable parts of the area.
2. Expired comparable listings. These are expired and withdrawn listings for homes similar to the one you are selling. The real estate agent looks at when the home came on the market, the price, when it went off the market, and why it went off the market. The agent also looks at the history of price reductions on the listing, if the homeowner used several agents, and the current status of the property.
3. Sold comparable listings. Similar homes that have sold in your area are also looked at in detail. Square footage, amenities, location, and the history of the listing are important. Of primary interest is what the home was initially listed at, the number of price reductions, and the final sales price.
4. Pending sales. Again, the real estate agent will want to find homes that are somewhat similar to yours. The history of the sales can tell if the market is turning, if certain prices are becoming the norm in an area, or if the public is gaining interest in buying homes. Sometimes an agent will speak with the listing agent of the pending sale to gauge how difficult it was to make the sale or to get lenders interested in that area.
5. Active listings. The real estate agent will look at what your competition is right now. Agents routinely tour homes for sale. They see what the buyers will see and compare how your home looks compared to what is currently for sale in your area.
6. Square footage comparisons. It is true that when a home is being appraised, most appraisers prefer to stay within 10% of net square footage when looking at comparable homes. That means that a 2,000 square foot home will be compared with homes in the 1,800 to 2,200 square foot range. Therefore, your agent will concentrate on similar homes in the 10% range when looking at comparables. Sometimes this will show a potential difficulty in finding the comparables that appraisers will use.
7. Market conditions. The agent will look at the market conditions when determining what price to list your home at. The same house will list higher in a hot buyer’s market than in a cooling or cold seller’s market. The agent must be able to look at market trends for changes that are about to happen.
8. Experience. Finally, the real estate agent will take all the above seven factors and add his or her experience and knowledge of the area to determine what price to list your home at.