So you plan to sell your home: How much should you ask?

Editor’s Note: This article originally appeared in the Los Altos Town Crier

If you are planning to sell your home, setting the right price is one of the most important tasks on the path to success. There is a lot more to price than just a number. So first, let’s take a closer look at the pricing process. Is it a fair assumption that you would like to walk away with the highest possible price you can get for your home? Let’s assume yes, but one who thinks they should just ask that price – or maybe higher – is likely mistaken.  

That might be the right strategy in a low-demand market, but that’s not what we have here in Los Altos and surrounding Silicon Valley communities, where demand is high and inventory is low.  Of course, markets are living, dynamic things, so it’s important to check in with your realtor just before putting your home on the market and confirm that all pricing assumptions still hold. In the first quarter of this year, the average home closing price was 107% of asking across the markets of Los Altos, Los Altos Hills and Mountain View, according to data from the Multiple Listing Service (MLS). A successful pricing strategy many realtors use, myself included, is generally to set that asking price which spurs the highest number of buyers to be attracted to this opportunity and to drive toward a multiple bid situation. So, what is that price? 

“Hard” and “soft” data 
It’s a number we arrive at using at least three kind of data points – that of the past, present and future. But also a mix of quantitative, “hard” data, pulled from the MLS to look at all the sales of comparable homes recently sold in your area; and softer, and arguably more important, “anecdotal” data from a realtor who is plugged in locally. A good realtor brings the present and future into the consideration of setting a price.  

Of course, you would want your realtor to pull all the active listings and pending sales; ideally, your realtor may have reliable knowledge of what pending sales have sold for and whether there were multiple offers (and how many). Information on pending sales is not public knowledge, and even the MLS doesn’t keep accurate records of multiple offers, so your realtor’s knowledge base, reputation and professional network are crucial. Your realtor should be actively engaged in the local area where you have your home and be able to provide insight into the activity level that each actively listed home is generating. Likely he/she has seen some of these homes and knows whether there are bids in play, if there is a bidding war going on, or whether those homes are without much activity right now.  

When you hire a realtor, you hire more than that person; you hire their whole ecosystem of relationships, including with other realtors who actively sell in your market. So, all that paints a picture of the present that “hard data” cannot describe. Finally, the future picture emerges when the realtor can share knowledge, gleaned from other realtors within and beyond their firm, of those homes in your community that are getting ready to go on the market at the same time you are.  

You can (almost) tell the future 
This last one – the insight into what the immediate future looks like, is vital to understand because this is your cohort. This is the inventory that the buyer will have to evaluate at the same time your home is for sale. Looking at average days on the market can hint at what homes currently for sale are likely to still be active when your home goes on the market. Your realtor should be proactive in floating your coming-soon property out to the local realtor community and get feedback on the pricing and anticipated demand before you officially go on the MLS. This provides good data points that can help sellers have a better sense of demand and pricing.  

So that’s the data piece – looking at the past, present, and future and combining it with local knowledge. This homework can help you and your realtor assess whether your home is a candidate for multiple offers; if so, well, it would be oversimplifying to say set a low price so that it will be bid up. What you actually want to do is set the highest possible price that is low enough that if a buyer could pay more than you’re asking and still be motivated to see the sale through to close, they’d be happy and so would you.   

Getting multiple bids
Are there crazy-motivated buyers who might way overbid and drive your price up even more? It happens, but I would advise my client not to count on it.  

Serious buyers are working with local realtors and should be well-advised as to bidding range strategies and the market at a given time. The element of timing, I hope you are taking away, matters a lot, by the way. There isn’t just one norm for even as long as a whole season; if multiple offers are common in your community (and we’re seeing some in Los Altos and surrounding communities now), how much prices are bid up as a percent of asking will fluctuate in different communities, even different neighborhoods in those communities, and as often as month to month as the season progresses. Finally, getting to the right asking price for your home is something you can ballpark weeks out while you are making your other marketing plans in preparation to sell, but the right price will only be crystal clear about 7-10 days prior to going on the market.  

Renovation: Is it worth it? 
One final key area in pricing your home is whether you have done renovations inside and/or outside of your home. This impacts curb appeal greatly and will favorably impact price. Most buyers in the price ranges that homes command in this area want a move-in ready home; they don’t want to have to perform renovations or very many upgrades. In an upcoming column, I will dive into the topic of renovation specifically and take a look at which ones have brought the highest returns.