How Realtors Determine a Listing’s Sales Price

Property value
In a perfect world selling high and buying low would be the norm and everyone would be satisfied. Although today’s real estate market is not that perfect world, satisfaction is not unattainable especially when it comes to pricing a home to sell. Your Realtor will be your go to resource to figure out what is an obtainable listing sales price and what obstacles lay ahead in that not-so-perfect world.

Realtors use a number of factors to determine a listing’s sale price and understanding each is important so that you’ll be a satisfied and informed seller.

A listing is what it is because of the comps

In order to accurately price your home a Realtor has to look at a combination of other properties in your neighborhood, similar in comparison to yours, that fall into three categories:  currently for sale,  recently purchased, and those which failed to sell while listed.  This all makes up a Comparative Market Analysis.

Interpreting a Comparative Market Analysis

Assuming that the houses in the comparison are similar in size, features, and amenities, and were all recent transactions, the results can reveal an indisputable price range.

Houses currently for sale:

Houses currently for sale reveal what the competing sellers are hoping to get for their houses.  It also determines how competitive you want to be.  Do you have the features and amenities to compete with the higher priced homes in the spread or does your house compare with the lesser priced homes.

Houses that failed to sell:

Houses that failed to sell provides a price ceiling.  Similar houses to yours failed to sell at that price so you can expect the same thing to happen to you.  The odds are not in your favor if you price your house in that price range.

Houses that sold:

Houses that sold show what buyers are willing to pay.  This is the range you need to pay the most attention to because it is the only range that has proven to be successful resulting in a sale.  Sure, you can price above the sold range, but you do so at your own risk and how high above the sold range you price your house depends entirely on the competition of houses currently for sale.

Go for common ground

Any one Realtor’s recommended listing sale price isn’t the end-all-be-all so while you vet Realtors for the job it is helpful to see how their individual CMA’s compare with the other agents’ CMA’s. Common ground amongst CMA’s is an indicator of what range your listing price should fall in to be competitive.

Your Realtor is your ultimate guide in the listing process, but understanding what goes into each CMA helps you make the best choice in determining the best listing sale price, or determine how risky a higher price would be.  Ask each Realtor why any given listing is included or left out of their CMA as that will inform your decision.

Price per square foot

Just as a CMA includes numerous considerations, a Realtor determines your home’s list price via more than just one factor. A common mistake made by novice sellers and buyers is assuming price per square foot alone can determine a list price. Know that it is necessary for your Realtor to know the average price per square foot of properties to similar but this it is truly just a jumping off point.

Bed, bath, garage & beyond

Another set of factors that determine the price is how the square footage is laid out.  How many bedrooms, how many baths and half-baths, number of garage spaces, etc.  Also the Average Days On Market helps to determine how fast you could expect the house to sell if priced right, priced higher, or lower.

Market conditions

Take a look around your neighborhood, your city, your state…everything. What you are looking at is the market in which you will list your home. The right Realtor for your home will be keenly aware of what is going on in the overall housing market and will use these observations to establish their recommended listing price.

This portion of the list price is really the most inquisitive. Questions big and small abound especially for the real estate market today:

  • Are properties in the area “going, going, gone” or are they sitting on the market for what seems like forever and a day?
  • Are the majority of homes for-sale-by-owner or bank-owned properties?
  • Are buyers clamoring for homes or are they nowhere to be found?
  • Are there a lot of new-construction properties nearby?
  • Are you near convenient shopping and dining?

Even local and state economies factor into settling on your listing’s sale price.  Issues like unemployment or an impending recession impact whether or not there is an upward or downward trend in overall home sales.

Whatever the case, the market around you will affect your listing sale price so if you’re able to weather any of the disadvantages noted above then you are more likely to get a result you’re happy with.

Your flexibility—or lack thereof

At the end of the day while your Realtor will use their know-how and tools to come up with a reasonable list price, your part in the selling process will also factor into the decision. Your ability to be clear-headed and realistic throughout the pricing process can weigh heavily on the listing sales price and how quickly the property moves. Another factor dependent upon you is will you make the necessary repairs and make the house look its best.  If you restrict showings, or don’t keep the house looking pristine, expect a lower sales price.  If you are unrealistic or inflexible in assisting the Realtor with any of these factors, either she will decrease the sales prices to compensate, or the house will linger on the market until you’re forced to lower the price.  Or worse, you join the statistics of the unsold.

Your Realtor will help you to assess your own price if it is, most often the case, overpriced. This can happen when inflexible and unrealistic sellers overvalue their home.  For example, over-improving the house compared to the market, inflating the price due to emotional sentiment, or asking for a higher price based solely on what you still owe on the mortgage will not influence a buyer’s decision to justify your high price.  None of these factors outweigh the market’s influence on sales price.  A Realtor will set a listing price to garner interest quickly, take advantage of the interest new listings attract, and move the property off the market as quickly as possible to prevent your house from becoming an old listing in need of a price drop.

Trust your Realtor, they know what they’re doing.

Now that you know the list of factors that go into your Realtor’s recommended listing sale price you can sit back and let them take the wheel. The key here is to understand that in an ideal world you, along with your Realtor, can determine a fair list price that buyers will be willing to pay. The more the list price is determined by reality and what the market truly looks like—as your Realtor knows it best—the quicker you’re on your way to putting that SOLD SIGN out front!

If you are buying or selling a house and are looking to hire a successful real estate agent to help you through the process, take a look at AgentHarvest's list of top-ranking local Realtors in your area. We found these agents by examining their sales track records, awards, rankings, client testimonials and by conducting personal interviews.

2 thoughts on “How Realtors Determine a Listing’s Sales Price

  1. Hi Harry, Kelly Carnochan with Century 21 Executives Realty in Vernon British Columbia. I really like your blog from 2014, How realtors determine a selling price. I am wondering if I can use this with credit to you on my web page? Thanks in advance.

    • Yes, you can use parts of this article as long as you link back to the source page where the quote was lifted. We prefer that you limit usage to a few sentences or paragraphs, so that your article appears obviously different from ours.

Comments are closed.