Bortz Team Real Estate Podcast
HOW TO PRICE YOUR HOME TO SELL
Whether you list with an agent or decide to go the For Sale by Owner (FSBO) route, home sellers need to know how to price your home to sell!
Inventory across many states are at an all-time low; and with that many home sellers are asking above and beyond true market value for their homes. Though this may seem like a good decision, it is not a wise one.
In our working relationships with countless sellers over almost 2 decades, we have had the opportunity whether on a listing appointment or in speaking with a FSBO to ask them how they came up with the price they are asking for their home.
Here are the top 5 reasons we have heard:
I know what I paid for it and I added the cost of all the improvements and upgrades I have made.
The neighbor down the street is listed for “X” and my house is in better than theirs.
I don’t have to sell, I am waiting for a cash buyer to pay me what I want, or I won’t sell.
I don’t have to sell, but if someone gives me what I am asking, I will sell it
If you had to rebuild this house, you couldn’t build it for what I am asking.
Though these reasons may appear to have some logic to them, they are really more rational than reality. We will discuss each of the reasons and why they are not valid reasons for arriving at a realistic price for your home.
Reason #1 – What you paid for your home has nothing to do with what its worth on the market today. Real estate is cyclical and every month sales comparables change and then is reflected in the housing market valuation for your particular area and subdivision.
Sure there are certain improvements that homeowners can make to your property that will add value at resale. We posted the top improvements here on a prior blogpost. Even with that being said, you do not get “dollar for dollar” cost for the improvement. For example, if you pay $30,000 to add a pool or new addition, it will not increase the market value by $30,000.
When it comes to determining “market value” there are generally 3 methods:
* Sales Comparison
* Cost Approach
* Income Approach
Reason #2 – Each home is unique as to the square footage, floor plan, amenities, upgrades, renovations, condition, etc. So even though your neighbor received a certain sale price, your home may not be able to achieve the same valuation or it may be worth more.
Reason 3 – We hear this one mostly from For Sale by Owners. Unfortunately, people with the kind of cash it takes to buy homes in the 21st century did not get rich by throwing their money away. Most cash buyers are astute investors, life long savers, etc. and they do their research and know the market.
The odds of getting someone to overpay for your property are slim to none….unless you have a truly unique property that someone just really wants and feels they can’t recreate elsewhere in that area. But those buyers will typically build not purchase a resale.
Reason #4– This statement always perplexes us. If you are not serious about selling, why are you “testing” the market. This is a bad idea especially if you use Zillow or Trulia where they keep a record of how long you have been on the market for the public to see.
Buyers start to think something is wrong with your home after they see it listed for too long. They can see other homes in your area selling, while yours is still sitting on the market and the negative perception about the property will come into play. Subsequently you will have to reduce your price and do what we Realtors call, “Chasing the market down”. The more time you spend on the market, the less you will likely receive for your home!
Reason #5 – When appraisers come out for the lend...