Setting the right price on your home requires a blend of objective evaluation and a realistic assessment of market conditions. Whether in a booming or sluggish market, you are more likely to benefit from determining the fair market value (FMV) and sticking close to it than setting an unrealistic price and waiting for a negative buyer response to reevaluate. 
The Temptation to Overprice
The temptation to overprice can be strong, but today’s buyers are savvy. Anyone who looks at your house — with or without an agent — has likely spent time both online and offline checking out properties. Most buyers and real estate agents will recognize an overpriced property immediately. This is often why homes sit on the market for months, only to have their prices reduced to where they should have been from day one.
When overpriced, your house will compete against homes in better locations with more bedrooms, bathrooms, and square footage. Buyers who might have otherwise considered your home won’t even see it because they’re shopping in a lower price range. By the time a seller adjusts the price, many of the best prospects will have moved on and purchased other houses, decreasing demand by reducing the number of available buyers for the now properly priced property.
Learning from Comparable Properties
Whether you are using an agent or not, understanding the listing and selling prices of similar properties is crucial. The local Multiple Listing Service (MLS) is typically the best source of comparable home sales due to its accuracy. However, no two homes are exactly alike, so it’s essential to identify the best comparables (comps) objectively.
To find the best comps, focus on homes similar in age, style, size, condition, and location. When looking at closed sales, aim to find at least three comparables no more than six months old, or three months old if market values have been rapidly changing. Here’s a breakdown of what to consider:
- Location: Limit your search to a quarter- to half-mile from your home.
- Look-back period: Only include homes sold within the past three-to-six months, or less if the market is changing quickly.
- Size: Try to stay within about 300 square feet of your home’s size.
- Bedrooms/bathrooms: Include homes with the same number of bedrooms and bathrooms as your house.
- Condition: Consider recent renovations, updated interiors, outdated features, or necessary repairs.
- Age: Homes built around the same time as yours will be the most accurate comps due to similar conditions of major systems like roofs, HVAC, and plumbing.
- Price per square foot: Real estate agents use this metric to identify comparables. Divide the sale price of a home by its square footage, then compare that number to your desired price per square foot.
The Role of MLS and the Disadvantage for FSBO Sellers
MLSs are private databases created, maintained, and paid for by real estate professionals to help clients buy and sell property. The MLS is not available to the general public, and accessing it requires a real estate license. This access is one of the main benefits for sellers using an agent. Not being able to list a home on the MLS can be a significant disadvantage for for-sale-by-owner (FSBO) sellers.
Ignoring Active Listings
Ignore homes currently for sale or pending. Sellers can overprice homes and settle for much less, or price below market value to incite a bidding war. Until a home sale closes, you can’t get an accurate read on its value in your local market — it’s only worth what someone ends up paying for it.
Seasonality and Its Impact on Pricing
Whether prices vary dramatically by season depends on your local real estate market. In general, homes sell more quickly in spring and early summer and take longer to sell in the winter. Sellers often try to motivate buyers in slower seasons with a lower sale price, so keep seasonality in mind when pricing your home.
Hiring an Appraiser
Consider hiring a local appraiser for a professional estimate of your home’s value. An appraisal provides useful information about the property, describing what makes it valuable and how it compares to other properties in the neighborhood. This helps ensure that the price you are asking is not unrealistic. The median price for a typical single-family home appraisal is $500, according to the National Association of Realtors.
An appraiser determines value by examining important aspects of the home, such as square footage, overall condition, the number of bathrooms and bedrooms, and comps in the area.
Emotional Detachment and Fair Pricing
Pricing your home can be tricky. It’s important not to let emotions interfere with being honest about your home’s fair market value. Your memories are priceless, but they don’t add value to the home.
Risks of Overpricing or Underpricing
Deliberately over- or under-pricing a home is risky. Overpricing can result in the house sitting on the market, and if a buyer is willing to overpay, the home might appraise for less, forcing you to lower the price or relist. Underpricing can backfire, causing you to lose thousands of dollars if buyers don’t respond with competing bids.
By carefully considering these factors and remaining objective, you can set a fair price for your home that attracts serious buyers and leads to a successful sale.