As a FSBO (For Sale by Owner) seller looking to list your home, you’ve already made the biggest and most financially intelligent choice: selling without a listing agent and avoiding the dreaded 6% commission exclusive right to sell listing agreement. In New York City, this decision which you’ve already made to sell FSBO can save you over $100,000 and drastically reduce your seller closing costs.
Before you actually list your home online and on the MLS, there’s only one thing left for you to finalize, and that’s your For Sale by Owner (FSBO) Listing Price. Here’s how you set your listing price:
Why is my initial FSBO listing price so important?
Intelligently pricing your listing is one of the most challenging yet important steps of the FSBO home sale process. Going to market with the right price on day one could make the difference between starting bidding war complete with an expedient sale or conversely a slow, arduous and potentially unsuccessful home sale attempt.
Placing your FSBO listing on the market with a low asking price may result in the following outcomes:
Attracting low-quality, ‘vulture’ or professional buyers
Prematurely selling your home for a below-market price
Conversely, if you price your home too aggressively you run the risk of:
Being viewed as unrealistic/unapproachable by buyers and buyers’ agents
Scaring away and or discouraging genuine buyers as a result of the above
Failing to sell your home because you’ve scared away or discouraged your buyers from even contacting you in the first place
Helping competing listings by using yours as an example of an overpriced listing.
If you misprice your FSBO listing and you don’t use a flat fee MLS service to list your home under the cover of a ‘listing agent’, you also run the risk of being targeted and ripped off by sophisticated buyers who prey on FSBO sellers’ lack of real estate experience.
How can I get free professional advice about my home’s listing price?
Hauseit offers all our 1% for Full Service sellers a complimentary pricing analysis before their property goes on market. Even if you do your own research and comparative market analysis (which we will discuss below), we still recommend that you speak with a few listing agents to glean valuable, free information about the nature of the local real estate market.
Why? A good agent who spends every day on the ground dealing with live buyers and sellers and will be able to offer you the type of pricing advice which can’t easily be found on your own if you haven’t been paying attention to the market for very long. Neighborhood insights and local market quirks are helpful bits of information which can help supplement the pricing analysis you do on your own.
Another good strategy as a FSBO seller is to identify a few listing agents and ask them to present to you a pricing analysis and marketing plan for your home. Mention that you are considering selling it on your own but you are curious about the pricing insight and marketing value an agent could deliver to the home sale process.
You will learn a lot about your home and the current flavor of the local real estate market by going through this exercise. And ultimately, if for whatever reason you don’t end up having the time to sell FSBO you will have a head start on the process of selecting a listing agent. 6% is still a large check given today’s home prices, so we at Hauseit also offer a 1% agent managed full service listing option for aspiring FSBO sellers who are simply too busy.
How do I set my For Sale by Owner FSBO Listing Price?
Many FSBO sellers prepare a Comparative Market Analysis (CMA) of their home in order to determine the optimal listing price. The CMA itself is the process of analyzing your home alongside comparative or similar properties which are on the market, pending, in contract, or recently sold in order to benchmark your home against them and come up with an appropriate listing price.
The properties against which you compare your own generally feature many of the same qualities of your home, including location, unit type (home, condo, co-op, townhouse, etc.), square footage, renovation status and property features such as building amenities, interior fixtures, natural sunlight, orientation of your apartment and much more.
What are the steps you take when conducting my Comparative Market Analysis?
CMA Step 1: Identify comparative properties recently sold or on the market
To identify comparative properties currently on the market, we recommend that FSBO sellers take advantage of Zillow’s search feature which allow users to draw an area on the map to identify the most relevant current listings. If you are a seller in NYC, popular real estate search websites such as the New York Times, Realtor.com or StreetEasy make it easy for you to search specifically by neighborhood (Tribeca, Soho, etc.) or by property type (condo, co-op or townhouse).
To find recorded sales data in New York City, we suggest you use StreetEasy’s Recorded Sales search feature. It allows you to easily search, sort and filter recorded sales by price, neighborhood, property type, etc. For other cities, recorded sales data will be available through your local government property records database.
In selecting comparative units, here are a few factors to look out for:
Your home’s neighborhood
It goes without saying that the most relevant comparative properties are those which are located in the same neighborhood. However, nuances of your home’s location in a particular neighborhood do affect the marketable price per square foot. For example, the Upper East Side is not a completely homogeneous neighborhood of NYC. Until the Second avenue subway is built, properties which are located further West and closer to the 4 5 6 Subway line will almost always trade at a premium.
Unit type (townhouse, condo, co-op, etc.)
NYC is home to the vast majority of the nation’s co-op apartment buildings. Given the different legal ownership structure and higher maintenance charges levied by a co-op compared to a traditional condo, the former will almost always trade at a discount to a NYC condo.
Square footage and apartment layout
Not all square footage numbers are created equally. An apartment’s layout is also critical in determining the value of a unit’s square footage. If an unusually high percentage of a condo’s square footage is wasted by hall space or a poorly designed layout, you can expect this unit to trade at a discount to another property with the same square footage.
Similarly, your one bedroom apartment will be worth more if it is a Junior 4 instead of a standard one bedroom unit. This is because Junior 4 layouts are more versatile and offer more configuration optionality.
Has your unit recently undergone a gut renovation or other renovation? The current condition of a unit can have a drastic impact on the marketable price per square foot as well as the monthly rental rates. As of November 2015, an un-renovated Soho studio apartment may rent for $2400 compared to over $3000 for an identically sized yet renovated unit in the same building. Both a buyer looking to live in your unit or an investor would be keen to pay an additional (fair and reasonable) premium for a gut renovated apartment.
The age, construction style, expected future maintenance outlays, and finances of your unit’s building are also important factors that must be accounted for. If, for example, a recently sold unit was in a building that has a high percentage of sponsor-owned units or a low percentage of owner-occupiers, we would expect this unit to have a below-market price per square foot given the difficulty a buyer would face in obtaining a mortgage in this building.
Given the number of unique buyers and neighborhoods in NYC, it’s understandable that each type of residence has a different target buyer clientele. For example, the target buyers will be different for identically sized apartments in Chelsea with one being an open loft live/work style unit and the other being a more traditional white-glove NYC pre-war apartment.
Once you’ve found at least 5 comparative properties either for sale or recently sold, you should calculate the average, minimum and maximum price per square foot of the property set. Make notes for each property as to why you think the price is above or below the group average.
Pro Tip – Watch out for active listings which have been sitting on the market for longer than 3-4 months. These are aspirational, overpriced listings whose prices are not representative of anything remotely real. Most of the time the sellers are just window shopping and waiting to find someone who is ready to overpay. It’s not a good idea to use these listing prices in your CMA because they don’t represent the reality of where the market was, is, or where it’s going.
CMA Step 2: Make pricing adjustments to account for the unique features of your listing
After coming up with your base-case price per square footage of the comparative property set, adjust the price per square foot up or down by some amount to account for the specific features of your unit. For example, if none of the properties have a washer/dryer but your home does, you can consider adding $xx to the price per square foot calculated previously.
Examples of features you should adjust upward for:
Has your unit recently undergone a renovation?
Is your building particular close to express trains or a major subway line?
Does your unit have a balcony, terrace or other access to a nice outdoor space?
Are you on a high floor with a particularly advantageous view?
Does your building have lots of natural sunlight?
Is your neighborhood undergoing any major improvements?
Does your home feature ample closet space?
Examples of features that you should adjust downward for:
Outdated features or fixtures
Suboptimal floor plan layout
Poor view or lack of natural light
Below-average owner occupancy rates in your building
Essential building or unit repairs required
Poor building performance history