1. Do you want the most money for your home?
2. Do you want to sell as quickly as possible?
3. Do you want minimum hassle?
4. Do you want maximum control?
If you answered “yes” to any of these questions, you want to price your home right, right from the start.
Selling a home is all about momentum. You need positive momentum—“buzz”—from the moment your home hits the market. You need to keep that momentum until the buyers sign the last document and put the last dollar in escrow.
Positive momentum comes from credibility. Yes, that’s right, your home has to have credibility with buyers and their agents. Your home earns that credibility in a number of ways: condition, appeal, full disclosure (including up-to-date inspection reports) and most important, the right price.
…and it’s like being popular in high school. Buyers like your home, they like you, they like your agent and they like the deal. Good things come from this.
Price it well and buyers may even compete for your home. That’s what you really want, because competing buyers bid up the sales price. Even if you attract just one buyer, that buyer is comfortable your home is a good value. Momentum keeps your buyer’s motivation high past the initial we-got-it! honeymoon, through the what-are-we-getting-ourselves-into? second act and right into the stirring we’re-doing-the-right-thing! finale. A comfortable buyer helps keeps your transaction on track. And if your buyer does start to stray, positive momentum gives you the leverage. Buyer knows he or she can be easily replaced, because your home is well worth what you’re asking.
But price it too high and you’re handing buyers the momentum. You’ll fight an uphill battle against them all the way.
Buyers and their agents will look at your house, shake their heads in disbelief and walk away. They know value and they know your house doesn’t have it.
Days turn into weeks and still no buyer interest. Buyers just entering the market see how long your home has been around and ask their agent, “What’s wrong with it?” The answer is, “Nothing a price reduction wouldn’t fix”, but that’s a tough sell with buyers. They think, “There must be something really wrong with that house. No one wants it.” The irony is that those same buyers would be asking their agent to write an offer if your house were priced where it should be.
At some point you tire of being a wallflower and ask your agent, “Why doesn’t someone just bring me an offer so we can negotiate?” That might happen, but it’s far more likely that buyers will see how far you are from market reality and decide it’s just too much trouble to close the gap.
Vultures start circling. These are the opportunists, the bargain hunters, the real estate pirates who know your ship is on the rocks. These folks are looking for your “pain threshold”. They’re not interested in your house, they’re interested in a bargain, and they’ll hit you with an offer well below market value. If you try to get a real offer out of them, they’ll just move on to the next shipwreck. And if you do get in contract with them, they’ll grind on you all the way to closing.
Sound pretty grim? It is. So why do sellers overprice their home?
Often it’s just that sellers can’t be objective about their home. Perhaps they’ve lived there for years and grown accustomed to their home’s drawbacks. Perhaps they’re not even aware it has drawbacks. A house can age imperceptibly to the people who live in it. Or they’ve made changes to their home that make it more appealing and valuable to them, and to them only.
Sometimes an unrealistic price comes from unrealistic expectations. Seller needs to get X dollars from his or her house and expects the market to cooperate. Or seller has put on a $20,000 roof and done $40,000 in foundation repairs, and now thinks the house is worth an additional $60,000. In fact, all seller has done is saved him- or herself the $100,000 discount buyers would have expected for buying a house with a bad roof and a bad foundation.
Other times it’s part of a deliberate strategy, the old school of pricing, how people still sell used cars: “I’ll price it high to start with because someone will just come in under my price anyway. If I don’t get any offers then I’ll lower it.” I understand the thinking behind this and admit that it sometimes works—if that’s how houses are usually sold in your area (not this area) and if the price isn’t too high and if the property is unusually appealing and if the seller is realistic about what their home is really worth and if the market isn’t biased in favor of buyers. In other words, the odds are against it.
This strategy violates the principle of keeping momentum working for you, not against you. Price it too high and every day your home lingers on the market it gets a little more “stale”, losing market value and invaluable momentum. Once it’s clear that no one understands you’re just a reasonable seller looking for a reasonable offer, you’ll have to lower the price. Then a buyer will make an offer below that price—and feel they’re doing you a favor. Try to raise their offer and they may just walk away.
Finally, overpricing sometimes comes from the seller’s agent. Perhaps the agent just doesn’t know the market. Perhaps the agent does know the market but will say whatever the seller wants to hear; that’s called “buying the listing”. And sometimes the market changes between the time the house is listed and the time it’s put on the market.
At that point the seller is faced with several options. One, she can sit tight and hope the “right buyer” comes along. Two, she can lower the price, stage the home, do some repairs or upgrades, or somehow enhance its appeal. Three, she can take it off the market. Option two is by far the best, followed by option three, with option one trailing well behind.
But the best approach is to avoid that situation. Price your home right, right from the start.
Interested in selling your home? Please contact me at firstname.lastname@example.org.
copyright © John Fyten 2004-2014