How Do Agents Price Listings?

Have you ever been looking at listings online, wondering how the agent and their client came up with the asking price? Well, the process usually involves research and some strategy, and it's rarely arbitrary.

The most common way to chose a list price is to compare the property to be listed with similar properties that have sold recently. Agents will look at the sold price of homes that are similar in square footage, condition, bedrooms and bathrooms, and in the same neighborhood. They'll use those sold prices, often in terms of price per square foot as a base point.

When it comes to sales comparison, there are other relevant factors to look at as well. Days on market will give a glimpse of the market reaction to a listing. If the property sold quickly, that tells you it was priced at or below market value. In other words, prospective buyers thought the price was right and wasted no time moving forward on a purchase. If the days on market is high, or if never closed, that might signal that the property was overpriced, unappealing in terms of condition, or marketed ineffectively. Your agent can compare the initial list price to the actual sold price, and any price drops in between by taking a look at the listing history.

Additionally, your agent might be aware of appreciation rates in your area. Between 2019-2020, home values appreciated at a rate of 10.4% in Knox County. It's possible that your agent will use an appreciation factor to narrow in on an appropriate list price. Using this factor, if your property appraised for $200,000 in 2019, it was likely worth around $220,000 in 2020. We don't have enough data to know the current appreciation rate, but agents who have a pulse on the market will be able to estimate based on the trends they are seeing in neighborhoods like yours. This strategy is more speculative than using comparable sales, but it is helpful!

Of course, there are unique homes out there that do not fit the mold of their neighborhood, making it difficult to price according to comparable sales. In this case, your agent will do their best to find the closest comparables possible. If you have a truly unique home, your agent may recommend a pre-listing appraisal in order to have a clear picture of your property's value. This can be a powerful tool for you when it comes time to list, because you and prospective buyers can enter into contract much more confident that the value will hold up.

I hope you found this information helpful! If you are interested in knowing your home's value, please feel free to reach out to us. We would be happy to offer you a free home valuation with no pressure to list. We want to equip you with the information you need in order to take the next step— whether that is listing or staying put!