You hope to sell fast for top dollar. Reality check: You'll probably have to compromise -- with a price that not only satisfies you but also attracts the right buyers and won't exceed the market value determined by your buyer's appraiser.
Agents don't pull a list price out of thin air. To begin homing in on the best price, you should expect that your agent will look at recent sales of homes similar to yours, current listings and pending sales.
For example, looks for at least three sales of comparable houses that have closed within the past 90 days. If the pool of sales is small, checks the county tax records for sales that weren't reported on the regional multiple listing service, such as ones in which a neighbor sold to a neighbor.
If short sales or foreclosures are prevalent in your market, your agent may also factor in their prices. However, given that these houses are often sold in poor condition, their sale prices may not have much of an effect on the pricing of your home, if it's in good shape.
Based on their research, agents will develop a price range for your home. Whether you start at the top, midpoint or bottom of the range is a decision that depends on how quickly you need to sell.
If you start a little lower than your competition, you'll generate traffic, and you can always say no to unacceptable offers. But don't start at the very bottom. Instead, build in room for negotiation so you can come down in price, if needed. Buyers like to feel as if they have won. Padding the price a bit is especially important if you haven't already reduced the price for deficiencies -- say, an outdated kitchen or a poor location.
If you're selling an entry-level home that will attract first-time buyers, you can anticipate that they will want help with their closing costs, which usually amount to 3% to 6% of the purchase price. So you may want to price it a bit higher to start. Keep in mind, though, that a buyer using conforming financing (backed by Freddie Mac or Fannie Mae) or a Federal Housing Administration loan can apply the home buyer's tax credit toward closing costs.