As a Realtor, one of our biggest frustrations is dealing with the unrealistic expectations of a seller. Sellers are notorious for overpricing their homes. The market is saturated with thousands of properties that will never sell without a price adjustment. Lack of comparable sales, poor or no Realtor representation, believing improvements are worth more than they really are, no knowledge of the real estate market, ignoring current competition, needing a certain sales price based on personal expenses and not staying on top of the current market conditions are a few reasons sellers overprice their homes.
Market value is the dollar amount for which a property should sell for between an able buyer and seller in an arms length transaction after sufficient marketing where both parties acted knowledgeably, prudently and with no compulsion.
What market value is not:
* It is not what you paid for the home plus Realtor selling fees.
* It is not how much your friend, in-laws, attorney, accountant, sister with a real estate license, neighbor or anyone else thinks your house is worth unless they are willing to buy it at that price and you are willing to sell it at that price.
* It isn’t what you paid for the home plus a needed or historical rate of appreciation.
* It is not necessarily what your neighbors house sold for plus some simply because you like your home better.
Here are ten tips to pricing your home properly:
1. Objective – Most buyers look at quality, location, size, condition when evaluating a home. They are not really factoring in all of the great memories you have there. Keep those great memories out of the purchase price. A buyer won’t pay for them. Stay objective and know what interests buyers.
2. Forget about what your home used to be worth – Like the stock market, the real estate market changes daily. Homes sell, expire and new competition comes on the market. Real estate prices don’t move as quickly as stock prices but nonetheless the market does change. Concentrate on what your property is worth today and what it will be worth in the next six months, not last month or last year.
3. Don’t expect a sucker – This happens occasionally but you certainly cannot rely on it. If you truly want to sell your home expect to sell it for market or appraised value.
4. What will your home be worth in the future? – This is a very important question since we are in a down trending market. I have seen so many people reject offers on their home only to accept much lower offers later because the value of their property declined. I had a home listed for $1,200,000. We received an offer for $1,000,000 which I thought was market value and explained that to the seller. She rejected the offer and the buyers walked away. Roughly a year later she accepted an offer of $825,000. If you think home prices are going to fall further, price your home competitively from day one.
5. Learn the real estate market – A good Realtor can help you here. Many agents put no effort into valuing a home. Examine the properties currently on the market, under contract, recently sold homes as well as the listings that expired without selling. Compare your home objectively to these homes.
6. More marketing does not justify overpricing – I do believe that good marketing is important in a bad market. You have to differentiate yourself from the thousands of other properties for sale. However, that does not mean that tons of print advertising, an open house every Sunday and thousands of Just Listed cards are going to sell an overpriced home. Great marketing may get a buyer in the door but that same buyer will look at your competition as well. Heavily advertising an overpriced home may only help sell your properly priced competitor.
7. Remember appraisals – If someone buys your home there is a good chance that they will get an appraisal or have an appraisal contingency in the purchase agreement. Even cash buyers get appraisals. If your home will not appraise out you will not sell it. Find three recently sold homes that are similar to yours. Make adjustments based on size, quality, condition, lot size and anything else that affects value.
8. Get in front of the market – If prices are falling quickly then you need to get in front of the market, don’t chase it down. If three recent sales were $400,000, $390,000 and $380,000 then stay in this ball park. Don’t start out at $425,000 and then chase the market lower. This happens frequently. Start out at the right price and you will put more money in your pocket.
9. Be the best deal – Selling a home is very similar to selling anything else. Buyers look for the best deal. This is not brain surgery. Examine your competition thoroughly and be the best deal. It is almost that simple.
10. Lower your price when needed – When a seller establishes an asking price one of the first things they do is grab a calculator and find out how much money they will net (if any) when they sell. That is fine but sellers need to keep in mind that it may be necessary to lower their price to get it to sell. The real estate market changes daily and sellers need to change with it.
Buyers are driving the real estate market. Keep these tips in mind if you decide to sell your home. Remember, the market determines the value of your home. You just get to decide if you are willing to accept that price.
Marc Rasmussen is a Realtor who sells Sarasota FL Homes For Sale