You are selling your house, and are super excited because you hear that it is a SELLERS’ MARKET.
True, but don’t let that lull you into thinking that you can just slap a For Sale sign in the yard and wait for the money truck to pull in.
Even in a hot market, there are homes don’t sell for many months, have one or more contracts fall through, post multiple price reductions, or don’t sell at all. And the degree of hotness varies by neighborhood.
Whatever the market conditions, the single most important factor in selling your house is to price it right at the outset. Below are six points to consider before you establish an overly aggressive list price.
Price to Attract the Right Buyers
Let’s say you have a $500,000 house that you choose to list for $575,000. For the buyers looking in the $575,000 range, your house doesn’t quite measure up, because after all it is a $500,000 house.
And the buyer who is looking for a $500,000 house (and would LOVE your house), never sees it because it doesn’t come up in their searches. By the time you reduce the price, they have bought another house.
Price to Attract the Right Agents
Experienced agents recognize an overpriced listing, and what they see is an unrealistic seller, and a protracted, unsuccessful negotiation that will leave them with a disappointed buyer. Consequently, they will not spend much time showing your property.
Or worse, they will show your house, but only to compare it to a more realistically priced home in the same neighborhood.
A favorite tool of buyers is the automated valuation model or AVM, such as Zillow’s “Zestimate.” Agents (including moi) dispute the accuracy of AVMs, but the fact remains that buyers use them to establish a benchmark. If your listing price is too high relative to an AVM, they won’t bother to make an appointment.
If the house doesn’t appraise for the inflated amount that the buyer has agreed to pay, their loan is jeopardized. In this instance, most buyers choose to walk away, taking their earnest money and weeks of lost time with them. Although in very competitive markets, some buyers agree to pick up the gap between the bid price and the appraised value, it is not a common practice. And don’t think a low appraisal won’t put a damper on your all cash buyer as well.
Recognize That First is Best
The first offer the house receives is frequently the best and highest. Those first bidders have been in the market longer, know the comps, and know what a fair offer looks like. Your overpriced listing will miss this window of opportunity.
After a price reduction, bids may be substantially lower, as by this time buyers think that there must be something wrong with your house. Better to nail the right price up front and catch a savvy buyer with a solid offer.
Understand How Improvements Influence List Price
This one is difficult for sellers to understand, but the improvements you put into your property will not necessarily generate a dollar for dollar return upon the sale of your home. The taste specific improvements may look great in photos and add to the home’s overall appeal, but will not increase the sales price relative to other similar homes in the neighborhood.
The best example of this is a pool. Pools can be quite expensive, but appraisers often apply a value equal to only about half of what the pool costs.
Understanding that cherished improvements such as an elaborate media room, European kitchen appliances, or a tricked-out garage workshop don’t add value to your home is a little painful. (There is a reason that all new construction homes in your neighborhood have the same finishes, floor plan, and amenities.) But acknowledging this truth is a major step to establishing the right price for your home.
Pricing your home properly will get it sold faster and for more money by attracting the right buyers and agents, increasing the number of showings, and eliminating fruitless negotiations.
Move on, happily!