Pricing the house correctly is the most significant thing a seller can do to increase their proceeds. Sellers proceeds are the amount of money the seller receives after selling a house. Every seller wants the most proceeds from their sale as possible. Pricing correctly is the best way to get the most.
Buyers see your listing price as the starting bid. If you price your home too high, buyers will not request a home tour. Ten days and no home tours indicate your opening bid is over the market value. Let’s help you find that sweet spot where buyers flock to see your house, and the offers roll in above the list price.
Marketing matters too. Specifically, the words used to describe the house can have a bigger impact than the high-quality listing photos. And the photos matter because it is your first showing. Let’s talk about what else matters.
On the page below, you will find answers to some of the most frequently asked questions about how to increase seller proceeds. We reviewed the research on what influences buyers’ likelihood to pay more when buying a home. You will find more in-depth information on other home-selling topics on the linked pages below.
We hope you find this information useful. As Tallahassee real estate agents, we are proud to be with Ketcham Realty Group in Tallahassee, Florida. We live in paradise and have the best jobs in the world. We want to help you sell your house! If you have questions about pricing a home, contact us. Even if you are not in Florida, we will find you an honest agent who’s your local expert.
If you are also buying, there are a lot more moving parts that need to be coordinated. Check out our Buyers Pages, and please download a copy of our book for Tallahassee Home Buyers.
Calculating sellers proceeds from the listing price: ‘typical’ closing costs for Tallahassee home sellers
Photos are of our pets on our farm. The photos are placeholders for future checklists.
Closing costs items paid for by the seller in Tallahassee.
Some closing costs are more negotiable than others. Below we are going to cover those costs that are not negotiable.
The closing statement will prorate the property taxes. The day of closing belongs to the buyer. Some closing agents calculate this number slightly differently than others. If the number on the closing statement does not make sense, ask the closing agent for an explanation.
On the closing statement, you will find a doc stamp fee. The Florida Documentary Stamp is a tax for transferring real estate ownership in Florida. The Leon County Clerk of Courts collects the fee when the closing agent files the paperwork. There is no maximum tax on these documents. Calculate the tax by multiplying the sales price by 0.007.
The mortgage and related payoff expenses
The monthly mortgage statement will provide a balance left on the home loan. This is not the payoff amount. The closing agent will ask you to sign a form that allows them to order the exact amount based on the closing date. Some mortgages have a prepayment penalty. When you signed to purchase your home, your mortgage paperwork would have disclosed the prepayment penalty. Some lenders will charge for the payoff letter.
Homeowners Association Costs
The homeowner’s association dues are also prorated based on the closing date. This information must be provided in writing by the HOA. The closing agent will reach out to the HOA’s contact and request an estoppel letter. Some HOAs will charge for this letter.
Seller closing costs are negotiable but commonly paid by the seller in Tallahassee.
Real estate commissions
The most significant seller expense is the real estate commissions. This expense is negotiable. Listing agents will negotiate the commission for the sale of the house, including the buyer’s agent commission. The contract you signed is with the broker of record and the listing agent if the agent is not their own broker. Under Florida law, all commissions belong to the broker of record for the agents listed on the buying contract. The closing agent collects and pays the respective brokers at closing. Agents can only be paid by their broker of record.
Repairs required by the lender
Repairs required by the loan often need to be completed before the house is closed. If the repair is necessary to fund the loan, there will be someone who must check and ensure the restoration is completed. This is often the appraiser. The seller must hire the appropriate professional and ensure the work is completed professionally.
Repairs not required by the lender are easier to negotiate. In that case, the repair can be completed after closing and with the buyer’s choice of contractor. This is preferred. It is the buyer who will be living with the results of the repair. They should hire a contractor they trust. The repairs can be handled in two main ways on the contract. In the form of a credit or an amount to be held in escrow. If the insurance requires the repair and can be completed after closing, the closing agent may be asked to keep the proposed amount in escrow until the repairs are completed. The contractor is given their check after verification that the repair has been made and the permits closed.
Closing cost items that the seller negotiates with the buyer.
There is a good chance you have an elevation survey if your home is in a flood zone. It would have been required when you purchased the home. Insurance companies require them for flood insurance. It helps companies calculate risk. Elevation surveys do not change over time, unlike boundary surveys. This is a buyer’s expense and offering this survey will lower the buyer’s closing costs.
Boundary surveys mark the property edges and are required for title insurance. If there is a loan on the property, the banks require title insurance. This means the buyer must purchase a boundary survey. Sometimes the title agent will accept an old survey with the sellers’ affidavit that no changes have been made to the property. Some title agents will not accept the older boundary survey.
In the most used Florida real estate contract, the side that selects the closing agent also pays the title insurance. This is negotiable, and not all agents play this way. There are agents that REQUIRE the buyer to close with the listing agent’s family member AND pay the title insurance.
Sometimes, the sellers will offer a home warranty instead of agreeing to repairs. The home warranty is a contract with a company that will provide home repairs at a significantly reduced price. Warranty companies have come under fire recently, and their popularity has recently declined.
Other costs that impact sellers proceeds
There may be other closing costs for the seller as well. Depending on where and when you close, there may be charges for mailing documents, dropping them off (courier), or a mobile notary charge. Review your closing statement closely. You should receive a copy of it directly from the closing agent within three days of closing.
We have posted a blog article covering the typical closing costs involved in a Tallahassee real estate transaction. This covers both the buyer’s and the seller’s closing costs.
All I need from a Realtor is pricing a home, right? How is it possible to earn more from a home sale by listing with a Tallahassee Realtor when they are the seller’s biggest expense?
Most real estate sales in the United States involve a real estate agent, even when sellers do not use a listing agent. Surprisingly, the percentages have been trending up in recent years. It was predicted that Zillow would be the end of Realtors. Turns out, buyers like to have an agent guide them through the process. As a seller, if you alienate Realtors, you may be chasing off buyers as well.
Pricing a home, marketing, and experience: Realtors versus sales by owners.
Here’s what the real estate researchers found about Realtors value:
- Miller found that only about a third of homes listed by the owners sold successfully (Miller, 1990). That excluded owner-agents (who sold for more) and was before the prevalence of home-searching apps and websites. These sites have significantly changed how Realtors market homes and should have helped sellers looking for buyers independently. The trend has been in the opposite direction.
- Some researchers have found that agents can help sellers increase their sales prices through specific marketing strategies (Allen, Cadena, Rutherford, & Rutherford, 2015). These strategies include open houses, broker tours, and ads that increase exposure for the house. Compare what you would pay for a diamond ring at garage sales versus jewelry stores. Even if it is the same ring in a box with a fancy price tag. People expect a professional to cost.
- In a survey of home sellers, those who hired an agent felt supported by the agent’s facilitation of the transaction, buyer screening, and communication throughout the process (Larceneaux, Lefebvre, & Simon, 2015). They felt more confident in their outcome working with an agent than those sellers who did not use an agent. (This is true of buyers’ agents too.)
- Many researchers have found that homes sold through the MLS sell faster (Hendel, Aviv, Ortalo-Magne, 2009; Huang & Rutherford, 2007; Jia & Pathak, 2010). This is standard marketing theory. The MLS is syndicated through Zillow, Trulia, Homes.com, and hundreds of smaller sites.
The most current research was the most comprehensive:
- When looking at broker experience, pricing strategy, and luck, researchers found that agent experience increases the odds that a house sells above the listed price (Zahirovic-Herbert, Waller, & Turnbull, 2021). Researchers found that all made a positive impact on the sale above list price. “It appears that experienced agents use more effective marketing strategies in this regard than do their less experienced counterparts.”
- In the most comprehensive study comparing homes sold by owners without an agent and homes sold by agents, researchers found that agents are worth more than the cost of their commissions (Miller, Sanchez, Sklarz, & Vamosiu, 2021). The researchers looked at over 100,000 single-family home sales. They found homes sold by agents were 7.4% to 8.8% higher priced than homes sold by owners. After accounting for a 6% commission, “FSBO sellers receive approximately 2% lower net revenue compared to sellers that use agents, or about $16,000 less net revenue for the average home in Los Angeles County.”
If pricing a home is the most important impact on sellers’ proceeds: What does the research say about how to select a list price?
What is a comparable property? How are comparable properties found when pricing a home?
This is the biggest challenge for any professional and owner. Usually, buyers lump houses together by neighborhoods. They may be looking in a particular school zone or a certain distance from a place of employment or worship. Nearness to the subject property is important but may not be the only thing to consider. For example, those who love the Lakeshore area often like Greenwood Hills too. Even though they are several miles apart, they are both hilly, forested, and wrapped around Lake Jackson.
Zahirovic-Herbert et al. (2020) found, “One nearby sale at or above listing price is associated with a significantly greater probability of the subject property selling above listing price and increasing the number of such sales further increases the probability. This indicates that sales above list is to some extent a neighborhood phenomenon and that such sales feed off of other nearby sales. When taken at face value, houses lucky enough to be near other sales above list are more likely to sell above list themselves.” Or put another way, “The pattern may also reflect that buyers to some extent rely on nearby transactions when formulating their offers.”
When is the best time to list a home in Tallahassee?
Thursday afternoon is the best time to list. That is the time that buyers are reviewing the market to decide if there are any homes they want to tour over the weekend. We often hear sellers say that March is the best time to sell. Having looked at the numbers in many ways over the last decade, we have not found much evidence that March homes sell for more. We have a stable employment base in Tallahassee with the state government and universities. There will always be buyers looking for a home in our corner of paradise. We will come back to this in more detail in a future blog.
What is a pool worth when pricing a home?
New agents struggle with questions like this. Of course, a fourth bedroom is worth something, but how much? The same question is asked of many home attributes: half baths, full bathrooms, man caves, she sheds, garages, carports, etc. This question is bound to get a crowd of Realtors talking and even arguing. Everyone has an opinion on what a buyer is willing to pay. Because of COVID lockdowns and the increased cost of construction, Tallahassee buyers seem willing to pay more recently for amenities like outdoor kitchens and pools.
The answer is that it depends. The pool’s value depends on the pool’s size, construction, landscaping, patio, and many other things, including how many homes have pools in the neighborhood. Experienced agents will tell you that a pool in Summerbrooke is a smaller bump to the listing price than a pool in northwest Tallahassee. Many homes in Summerbrooke have pools, which are rarer in the northwest corner of Tallahassee. Buyers want more amenities and are willing to pay for them if the home is farther from the city limits. Thanks to Greg Lane, appraiser, for his input on this question.
Does the days on the market impact sellers proceeds? How are average days on the market calculated?
The longer a home is on the market, the less a buyer will pay. In many real estate studies, time on the market has been negatively related to the sales price. Check out the references here.
The days on the market will include the time the house was marketed as coming soon. The only way to reset the days on the market is to remove the house from the market for at least 30 days. The cumulative days on the market are calculated using the identification number from public records. Sometimes Tallahassee real estate agents ‘game’ the system by changing the address from ‘Road’ to ‘Rd’ in the description.
Is pricing a rural home the same as homes within city limits?
No. Rural homes are likelier to be atypical and have a harder time finding local and comparable properties. Atypical properties sell at a discount or take longer to sell (Haurin, 1988 and Haurin et al., 2010). Since there are fewer comparable properties, appraisers are less likely to appraise homes at contract value. Rural homes also take longer to sell than homes within city limits. Having a listing agent familiar with these differences is crucial for proper pricing and sales negotiations.
Should the listing agent handle both sides of the transaction?
No. Many buyers want to work with the listing agent directly because they can get a discount. This appears true. Zahirovic-Herbert et al. (2020) found that sales by the listing agent meant that the property was significantly less likely to sell at or above the listing price. If the seller is open to owner financing, the listing agent will likely negotiate those terms and conditions. Of the owner-financed houses in the Tallahassee MLS, 60% were exclusively handled by the listing agent.
Pricing a house is crucial, but marketing is too. Which marketing has the biggest impact on increasing sellers proceeds?
Do open houses help sell a home?
Yes. Allen, Cadena, and Rutherford (2011) report a positive price effect related to broker marketing tactics, including broker open houses, public open houses, photographs, and virtual tours. Any time an agent can promote the house, the better. Open houses are also a security risk. Monitored properly, they are no riskier than an agent-requested showing.
How do I know that my Realtor’s marketing is working?
How many home tours have you had in the past week? Our general rule is to consider a price adjustment if there are no showing requests for ten days. Alternatively, if there are at least ten showings and no offers, it is a sign that buyers think the price is too high for the condition. Even bad pictures and poorly worded descriptions will not keep the buyers away from their preferred neighborhoods.
Research has looked at agents shirking their duties to the seller and found little evidence. One of the reasons is that properly priced homes do not last on the market. Researchers have found that time on the market lowers the sales price. Zahirovic-Herbert, Waller, & Turnbull stated, “it looks like high value buyers tend to show up early in the marketing period when agents have the weakest incentives to aggressively push the property.” In all fairness, the agent’s marketing to sell homes also brings them more buyers. Time on the market favors the listing agents’ pocketbooks more than the sellers.
Does the house’s description impact buyer behavior?
This is a question that many researchers have attempted to answer. The answer appears to be yes, that the words used in a description will bring buyers. However, the quality of the writing appears to matter. For example, Seo et al. found that more words increased the time on the market for the house. The description should add information for the buyer.
“Our findings show that the role of unstructured qualitative text varies; some are redundant to the quantitative information already in the models and have no effect, while others, particularly those reflecting the quality of the structure, represent unique information and are important predictors in determining housing prices and the time on market.” (Seo, Im, Mikelbank, 2020)
How do sellers know who to market their homes to, and how do they find buyers?
We use the NARRPR trade report to describe neighborhood statistics, socio-demographics, and marketing information. For example, many soccer moms live in Piney Z and value outdoor activities and trails. That makes sense, considering the Heritage Trail is in their backyard. Realtors are a trade organization and have spent a lot of time and effort building their syndication network. They have also used their collective power to analyze marketing and MLS data. Every research article reviewed said that homes sold on the MLS sold faster and for more sellers proceeds.
What Researchers Found About Pricing a Home.
- When sellers require a pre-qualification from a buyer, it does not affect the ability to sell a home above the list price.
- Requiring a notice to show and offering a home warranty lowered the likelihood of selling above the list price.
- Agents’ comments increased the likelihood of selling above the list price.
- “Greater listing agent experience increases the probability of selling above the listing price.” (Zahirovic-Herbert, et.al., 2019)
- Atypical properties tend to sell at a discount, or they take longer to sell.
- Offering an agent bonus does not impact the likelihood of selling above the list price.
- “Using only positive words in the listing descriptions has a significantly higher impact on the likelihood to visit a home than high quality pictures and type of home.” (Luchtenberg, et.al., 2018).
- Motivated sellers sell 30% quicker. (Glower, 1998) They found that sellers with a planned move-out date sold faster, and the authors speculated that sellers were more likely to adjust their prices quicker.
- The listing price affects the arrival of buyers. The listing price is the starting price to begin negotiations. Too high, and the buyers will not tour the home. Too low, and the sellers lose money. Buyers and their agents recognize the low price and offer over the listing price, but below market value. (Arnold, 1999)
- Setting a price at or slightly below market value helps the house sell faster than slightly overpriced homes. (Knight, 1994).
- Vacant houses sell at a discount compared to owner-occupied houses. Tenant-occupied and vacant houses are less likely to sell above the list price. The buyers consider the seller’s holding costs as negotiating leverage and discount the offer price due to the wear and tear of tenants. (Turnbull & Zahirovic-Herbert, 2011 & 2012).
Correctly pricing a home helps sellers earn more when selling their Tallahassee home. Houses are unique and hiring an experienced agent will help you when pricing a home. Tallahassee Realtors will put more money in your pocket and save you stress and aggravation. Contact us when you are ready to list your home! We look forward to selling your home.