Setting sale price on a home

[Anonymous]

We're about to put our house on the market, and having an appraisal done today to get an idea of how much to list it for. (No comps have sold in our area in the last 2 years so we thought this would be the best way to determine this.)

Once we have the appraisal results back, should we list AT the amount it's appraised for? Above? Below? And if so, by how much?

I know a buyer would also have to pay for another appraisal at the time of purchase - do buyer's appraisals typically come in higher than when a seller has an appraisal done? I think I've heard this before (and that it's because an appraiser will try to come as close to the selling price as possible), but not sure how true this is. 

[ShanetheMortgageMan]

This is a question that is so specific down to your situation, that even someone on the same block could have a different correct response.  It's really best to ask your real estate agent that.  Even though your home appraises at X price doesn't mean that a buyer will buy it for X price - there are homes around here that are appraising in the $500-600k range but won't ever sell for that much because values are declining, so no one is going to pay as much as the last person.  If your market is similar then that logic will likely apply to you too.  But if your values are going up, price it as high as it'll appraise for because you'll likely get that amount - see the difference depending on your specific situation?

[Anonymous]

Well, we got the results of our appraisal today - it came in at $156,000.  We are in thinking of listing at $165,000, which will give us 'wiggle room' for buyers to submit offers that are lower (realtor says NO ONE offers listing price these days).  Then we'd still be able to sell for right about what it appraised for.  We can lower the price after a couple of weeks if we don't see any interest.  Our realtor agrees with all of this, but I'm such a conservative-minded person.

Any thoughts? Good idea? Bad? Should we have just list at what it appraised for??  I've never done all this before, so I'm just worried about making the right decisions here.

Message Edited by soccermomof4 on 02-03-2009 08:44 AM

[ShanetheMortgageMan]

Sounds good to me - what does your real estate agent say?

[Anonymous]

Our real estate agent feels good about listing at the higher price, and while I trust her and really  liker her, I can't help but think...of COURSE she would, because she'll be making commission based on a percantage of the selling price, so wouldn't that sway her to want to list at a higher price?

I just hope we're doing the right thing.

I really hope we can pull this off and sell for close to the appraisal - we only owe $100k on our mortgage, so whatever we have left after paying closing costs, fees, etc. will be our downpayment on the NEW house (which we are still searching for...)

[ShanetheMortgageMan]

Real estate agents are primarily concerned with what will sell your home the fastest - not what will get them the largest commission.  It doesn't matter if they have a $100,000 commission staring them in the face if they haven't priced your home competitively with others.  What is $4k more in sales price to an agent?  It's $120 more in their commission if they are getting 3%, not much in the big picture.

[Anonymous]

Ah, well when you put it like that, it makes perfect sense!! Thank you Shane! I feel better about this now.

I will update when we get offers/sell the house. We're also looking for a new one, and we're about to go through the approval process. The current economy is really what's making me so nervous about this whole thing.  Keeping our fingers crossed that all of this works out!

[ShanetheMortgageMan]

Welcome, good luck on the home sale, let us know how things go.

[Lel]

I'd think hard about whether to price your home above the appraised value. There's a real risk in overpricing a home - if the price is higher than people are willing to pay, your home might not attract interest and it will sit on the market. The longer your home sits, the lower the selling price. This has been demonstrated time and again, sometimes with very painful financial consequences.

You're running a bit blind since there aren't any comps in your neighborhood. But if yours is a buyer's market (like it is in many places due to plummeting home values), then setting a somewhat lower price might actually get you the best price. I read somewhere that if a home is listed X dollars above the fair market value, it typically sells for X dollars below. You might want to look a little farther out to see what has been selling in nearby neighborhoods.

This obviously is just a rough rule of thumb, and your results may vary. I've seen this phenomenon in my neighborhood. A friend of mine sold their home two years ago for $1,060,000. One month later, a home nearby with the exact same floor plan (and similarly nice upgrades) went on the market for $1,100,000. The second house was actually in a nicer location (park view, quieter street, not near a large 4-lane thoroughfare), but there were no takers. The house sat on the market for about two months, had two price cuts, and sold for $935,000.

[MattH]

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@Anonymous wrote:

...realtor says NO ONE offers listing price these days...

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Yes, it is a different world from when my wife and I bought in 2002: at that time our agent was watching the listings and calling us every time one that looked suitable appeared.  Even then, half the time it was sold before we could schedule a viewing, and we counted ourselves lucky to get our place at the listing price.