Setting the list price for your home involves evaluating various market conditions and financial factors. During this phase of the home selling process, I will help you set your list price based on:
- pricing considerations
- comparable sales
- overall Maui market and neighborhood market conditions
- offering incentives
- estimated net proceeds
Pricing Considerations – Find a Balance Between Too High and Too Low
When setting a list price, you should be aware of a buyer’s frame of mind. Consider the following pricing factors:
If you set the price too high, your property won’t be picked for viewing, even though it may be much nicer than others in the same neighborhood. While you may be willing to take a lower offer, compared to other properties for sale, yours simply looks too expensive to be considered.
If you price too low, you'll short-change yourself. Your property will sell promptly, yes, but you may make less on the sale than if you had set a higher price and waited for a buyer who was willing to pay it.
TIP: Never say "asking" price, which implies you don't expect to get it.
Price Against Comparable Sales in Your Neighborhood
No matter how attractive and well located your property, buyers will be comparing its price with everything else on the market.
Your best guide is a record of what the buying public has been willing to pay in the past few months for property in your neighborhood. I can furnish data on sales figures for those comparable sales and analyze them to help you come up with a suggested listing price. The decision about how much to ask, though, is always yours.
Competitive Market Analysis (CMA): The list of comparable sales prepared from data in the MLS, along with data about other properties in your neighborhood that are presently on the market, is used for a "Comparative Market Analysis" (CMA).
A CMA differs from a formal appraisal in several ways. One major difference is that an appraisal will be based only on past sales. Also, an appraisal is done for a fee while the CMA is provided by your REALTOR® and may include properties currently listed for sale and those currently pending sale. For the average home sale, a CMA probably gives enough information to help you set a proper price.
Formal Written Appraisal: A formal written appraisal (which may cost a few hundred dollars) can be useful if you have unique property, if there hasn't been much activity in your area recently, if co-owners disagree about price or if there is any other circumstance that makes it difficult to put a value on your property.
TIP: If you do order a market value appraisal, make it clear you don't need an elaborate, or full narrative report, i.e., the kind that's complete with photos of the property and neighborhood. Floor plans and a site map is sufficient in most cases.
Market Conditions – Is it a Buyer’s Market or a Seller’s Market?
A CMA often includes a Days on the Market (DOM) value for each comparable house sold. When real estate is booming and prices are rising, properties may sell in a few months. Conversely, when the market slows down, average DOM can run into many months, and even a year.
I can tell you whether your area is currently in a buyer's market or a seller's market. In a seller's market, you can price a bit beyond what you really expect, just to see what the reaction will be. In a buyer's market, if you really need to sell promptly, it is important to offer an attractive bargain price.
The Maui market and economy is based on many outside economic factors. We are strongly affected by the mainland economy and the tourism industry. In some years, we have had a year round market and in others, it has been a seasonal market. We can discuss the current picture for Maui and how it is affecting the real estate market in your neighborhood.
If You Price High, Set a Schedule for Lowering the Price
It is fairly typical that Sellers in the Maui market will leave a little negotiating room in the offering price. Some sellers list at the rock-bottom price they'd really take, because they hate bargaining--however, be prepared for offers that come in below list price. Others add on thousands to the estimated market value "just to see what happens." If you want to try that, and if you have the luxury of enough time to feel out the market, we can sit down and work out an advance schedule for lowering the price if need be.
If there haven't been many prospects viewing your property after the first month, you may need to lower your list price. If that doesn't bring any prospective buyers, you may need to lower your list price again. Plan on doing that regularly until you find a level that attracts buyers. Make a written schedule in advance, before emotion takes over and you're tempted to dig your heels in.
Offering Incentives to Hasten a Sale
Sometimes cash incentives are as effective as lowering the price, especially in the lower price range where buyers may be "cash poor." You may offer to pay some or all of a buyer's non-recurring closing costs and discount points required by the buyer's lending institution. Lending requirements are continually changing and we can consult with a lender to find out what is currently acceptable.
If you haven't had much traffic and you’re in a hurry to sell, you may want to add the offer of a bonus to the selling broker, in addition to their commission. An example of the wording for such an offer may be "to the broker who brings a successful offer before a specific date."
Estimating Net Proceeds
Once you’ve been given an estimate of market value, you can get a rough idea of how much cash you might walk away with when the sale is completed. This can be particularly useful when you start looking for another home to buy.
To estimate your net proceeds, from the estimated sales amount, subtract the applicable costs in the sections outlined below: seller’s costs, buyer’s/seller’s costs and closing costs.
Seller’s Costs: Subtract the following costs as applicable.
- Payoff figure on your present loan(s)
- Prepayment penalty on your mortgage
- Broker's commission
- 60% of the title insurance premium
- 50% escrow fees
- Any attorney's fees
- Conveyance tax. Note: Pursuant to the rules of the Hawaii State Department of Taxation, the Seller must pay a higher conveyance tax if the Buyer is ineligible to file a county real property tax homeowner's exemption on the Property.
- Costs related to preparing the closing documents: the conveyance documents and bills of sale
- Cost of obtaining the Seller's consents
- Recording fees to clear Seller's title
- Seller's notary fees
- Any agreed upon repairs, including termite treatment, if applicable
- Homeowner or Condominium Association transfer fees and document preparation
- Cost of HOA/AOAO documents, if applicable
- Any unpaid property taxes
- Any unpaid assessments levied against the property as agreed upon in the purchase contract, if applicable
- HARPTA/FIRPTA, if applicable
- Survey/staking, if applicable
- FHA or VA mandatory closing fees
- Home warranty, if you chose to provide one
Closing Costs: The above are customary closing costs (including Hawaii General Excise Tax where applicable) and are not an all inclusive list. Escrow may charge the appropriate party other closing costs as directed by the parties. As far as closing costs are concerned, you and your eventual buyer may agree on any arrangement that suits you, no matter what local practice dictates. I can have a title company prepare an estimated closing cost statement to assist you in estimating what your final closing costs will be.