The Art of Pricing
As a real estate agent, there are tons of things that I love about the job. I love to…
look at houses,
meet people,
help build generational wealth,
design a home,
make a person’s home the right size for their life.
There are very few things that I don’t like, but the main one is telling someone the home they’re selling is not as valuable as they think. Inevitably, they always say…
“Well, Zillow says…”
Zillow is a great resource and it’s fun, even though I think they’re trying to take my job. The problem comes when they give their Zestimate. No one from Zillow has ever been in the house, they don’t know what it looks like. They have their Artificial Intelligence do the zestimating. That AI searches for other homes that have recently sold or are currently on the market in area and use those as the only real basis for pricing.
They don’t into account that maybe…
the house around the block just got a new $40,000 HVAC system,
the house down the road had to be taken down to the studs in a renovation, or
the owner on the corner waited for a year to get the price they wanted.
Heck, Zillow has no idea about the gold bars that line the walls of your mom’s house.
But, when I take into account the actual homes, talk to the other agents, and learn about the actual market in that specific area, the Zestimate is way out of whack.
When I tell anyone this, they panic and have gotten angry. They were under one impression and I am the one to give them to reality check.
When Zillow is not part of the discussion, a similar conversation starts. When I have told people a number lower than they expected, people suddenly remember…
the neighbor’s house sold for $10,000 more and our house is nicer,
they didn’t pull any permits for that deck they built across the street, or
there were always loud parties going on at the house at the bottom of the cul de sac.
Besides that, their cousin’s brother’s neighbor’s wife is a realtor and she says it’s worth more
This is part of the job and I’ve made peace with it. Overall, people want to know simply…
what is the house is worth?
The Simple Answer
A house is worth what the current market is willing to pay for it, based largely on its location, condition, features, comparable sales, competition, and current buyer demand.
What your parents paid for it, what they spent improving it, and what the family hopes to receive may matter personally.
But buyers don't know your family's math.
Pricing is important and requires tons of work.
Pricing is so much more than Artificial Intelligence can do, at least yet. There is legwork, phone calls, emails, and actually knowing the neighborhood to find that sweet spot. Good agents have perfected this and, I think, there is an art involved to it. Whenever I am asked to price a home for anyone, older adults, families, single sellers, or nosey neighbors, I always have a process:
I meet with the sellers and other important decision-makers to find out what’s important to them.
I look at comparable sales over the last 30-90 days and call the agents to find out important terms of the sale.
I personally tour homes similar and/or nearby to see how they compare.
I call agents with listings that are coming soon to the market and get an idea of how they got to a price.
I also call get in touch with agents who have tried and failed to sell homes like the one I’m pricing.
I ask other agents on my team at LUX. Denver Realty what they’d price it at.
After all of this, I come back to those decision-makers with all of the info and, most-of-the-time, with pen and paper, work out the math so it’s the right price when we go to market.
It’s important to understand one thing with pricing: Price and value are not the same thing
When you're preparing to sell, you may encounter several numbers. There are…
- online estimate from Zillow, Realtor.com, Redfin
- assessed value from the county, and sometimes
- a recent appraisal from refinancing.
There's the price you choose when listing the house.
And eventually, there's what an actual buyer is willing to pay.
These numbers can be different because they're answering different questions.
Pricing a home for sale isn't about discovering one magical number hidden somewhere in the drywall.
It's about understanding where the property fits in the current market.
Condition matters
This is true of any home, but can become particularly important when selling a parent's longtime home.
Your parents may have maintained the house beautifully, but “well maintained” and “updated” aren't necessarily the same thing.
No matter how much work, time, money, or work it took to maintain the house, a buyers may still walk into the kitchen and see something that feels dated.
That doesn't mean the house is bad. It means condition affects how buyers compare it with the alternatives available.
Improvements Don't Automatically Add Their Cost to the House
This one can hurt…
Suppose your parents spent $50,000 remodeling something ten years ago.
It's tempting to think:
The house should be worth $50,000 more.
Real estate doesn't work quite that neatly. Some improvements add substantial value, others add less than they cost.
Some improvements may have primarily increased your parents' enjoyment of the home while they lived there and other things were necessary maintenance - rather than improvements at all.
One specific example I have from a house I sold:
The inspection came in and the home needed a new sewer line. The seller did not want to do it, so the contract was cancelled. Now, because we knew this, it had to be disclosed. After waiting and showing it for months, the sewer line was replaced. Yes, a new sewer line costed a fortune and it was not ideal. At the same time, buyers are unlikely to enter the house whispering “My God. Look at that sewer line.”
The market decides how much value an improvement contributes.
The Neighbor's House Can Help, But Be Careful
Families love neighbor comparisons.
“The Johnsons got $625,000.”
Great.
Now we need to know about the Johnsons' house.
Was it the same size?
Same floor plan?
Same condition?
Did it have a finished basement?
Was it renovated?
When did it sell?
Did the buyer receive concessions?
Was there something unusual about the transaction?
One sale can provide useful information.
It usually shouldn't determine the entire pricing strategy. A well informed real estate agent can and should do the work for you. They should be making calls, finding out more information, and giving advice.
Ultimately, it’s the seller’s decision, but it’s good to have their advice in hand.
This is another reason that it’s important to have a pro help.
Active Listings Aren't Sold Prices
This is another easy trap. You find a similar home listed for $650,000 in a neighborhood just like your mom’s house. It’s natural to assume that, mom's house is worth $650,000.
Not necessarily.
An active listing tells you what another seller hopes to receive.
A sold property tells you what a buyer actually agreed to pay.
Both matter, but for different reasons.
Active listings show your competition, recent sales provide evidence of what the market has actually supported.
Pricing Confusing Idea #1: Pricing High "Just to See What Happens" Has a Cost
This strategy sounds harmless.
“Let's start high. We can always lower it or wait for a buyer to offer and we can meet in the middle.”
Technically, yes.
But it’s not the way to think. You want the maximum number of eyes on the house you’re trying to sell. If you are priced too high, it may never get seen because buyers consider it overpriced or it may not even fit into their online search parameters.
Confusing Idea #2: Days on Market Matter
The first days and weeks on the market matter. When the home hits the market, it’s new:
Buyers who have been waiting for a property like yours notice it.
Agents notice it.
If those buyers conclude the house is overpriced, they may simply move on. They could also start to play Let’s Make a Deal and offer very low offers. Another consequence is that the longer a home sits, the greater chance potential buyers think something is wrong with the house. That creates a stigma on the house that is hard to overcome.
Later price reductions can bring attention back, but you can't completely recreate the moment when the property first entered the market.
That's why pricing isn't simply about asking:
What's the most we can possibly ask?
It's about deciding how you want the market to respond.
Pricing Confusion #3: Underpricing Isn't Automatically Smart Either
There's another extreme - Price low and create a bidding war.
It can work in certain markets and situations, but it isn't a universal law of real estate.
If you employ this strategy, it has to be strategically priced low. There a sweet spot between "pricing it lower than it’s worth to spark interest” and pricing it so low it that buyers think there’s something wrong with it. That also creates a stigma on the house . These also can be overcome with strategies, but agents are pretty keen on things like this from the get-go.
Pricing Tip: A pricing strategy should be intentional.
There is a general feeling for buyers and agents. If you are priced, it could come across that you’re greedy. If you’re priced low, it could come across that you’re desperate. You have to ask yourself and answer honestly…
What pricing strategy gives this particular house the best opportunity to accomplish this family's goals?
Pricing Tip #2: Don’t let emotions stand between the price and the sale.
When selling any home, you cannot account for the memories made there, the relationships that blossomed there, or the pride of ownership of the home. Emotions and valuation do not work in tandem. Of course…
You may have grown up there,
Mom may have spent 30 years making the garden beautiful,
Dad built those basement shelves himself, and
The kitchen table may be where everyone did homework.
Yes, that history matters, but it just doesn't necessarily translate into additional market value.
Strangely, it feels personal that buyers aren't rejecting your memories when they assign a different value to the house.
They simply don't own those memories.
They're deciding what the property is worth to them.
Those are two different things.
So How Should You Price a Parent's House?
Start with evidence.
Look at recent comparable sales.
Look at current competition.
Evaluate the home's actual condition.
Consider the current market.
Understand what buyers are likely to compare it with.
Then consider your family's goals and timeline.
The goal isn't to find the highest number you can defend.
And it isn't to make the house disappear as quickly as possible.
It's to choose a price that positions the property to produce the best realistic outcome.
The Bottom Line
Your parent's house may be priceless to your family.
Unfortunately, that makes for a terrible MLS price.
The market will ultimately decide what someone is willing to pay.
Your job before listing is to give the market the best possible opportunity to recognize the home's value without asking it to pay for memories that belong to your family.
Price the house based on the market. Keep the memories for yourselves.