Pricing Your Home to Sell
Overpricing your home is one of the most costly mistakes you can make. Pricing your home too high can cause a chain of events that make it difficult to sell your home:
- It takes your home out of the search results for a lot of people who could buy your home if it were priced correctly.
- Agents quit showing your home
- Your home just sits on the market with no or few showings (Buyers are very hesitant in making offers much lower than your listed price as they don’t want to insult you)
- When your home has been on the market too long, it makes agents and buyers wonder what is wrong with your home.
- You may have to drop the price way below what it is worth just to get people to look at it again.
- Another thing to keep in mind is that the homes that have sold recently in your area are also telling you how an appraiser has valued the homes in your area. Even if you get a buyer who is willing to pay more for your home unless it appraises higher or the buyer is willing to pay cash above the appraisal price it won’t sell. (Lender’s are just not willing to loan more money than a house is currently worth) Also if the buyer is an FHA buyer and the appraisal comes in low that appraisal stays with the home through any future sales. (Of course you may find an all cash buyer who is willing to buy, but finding someone like that who is willing to pay more for a home than the market is suggesting eliminates about 90% of possible buyers.)
To avoid these things from happening a good agent will show you comparable (comps) homes that are similar to your home in your neighborhood that have sold in the last 1-6 months. You also want to see homes that are currently on the market and how they are priced as this is your competition. (Remember, even when you have made a lot of improvements to your home it is only worth at this moment in time what buyers are willing to pay for it.) It is all about supply and demand if the market is telling a buyer that your home is only worth so much a buyer is unlikely to pay more for the property.
Just to share a personal story, I had clients who wanted about 50K more for their home than what the comps were suggesting. They had put several upgrades into their home and felt that would compensate for the difference in price. The home was beautiful (although somewhat out dated) because the clients were persistent about wanting the higher price I went ahead and listed their home at the price they wanted. We had open houses, professional photographs taken, agent tours, marketing fliers sent out to thousands of agents, etc. We had a few people look at it but no one made any offers. (I did suggest to the interested buyer’s that they make an offer based on what was reasonable to them and we could work from there, no results.) Weeks went by and we finally lowered the price got a few more looks but again no offers. The second time we lowered the price we got a buyer in contract but the buyer quickly dropped out. Since we had now dropped the price below the comps and several months went by I suggested to my sellers that we take the home off the market and put it back on in 90 days as a new listing with the lower price. They thought that was a great idea as they didn’t want to keep the home as a rental and didn’t want to sell for any less. Within days of taking it off the market another contacted them and talked them into listing at a really price to create a bidding war and drive the price up, unfortunately that didn’t happen. The home ended up selling for a price $150,000 less than the original price and was in contract within days. There was nothing suggesting it should go this low. When first putting it on the market we priced it just below the average price per square foot of the comps and each time we lowered it was below the price per square foot of the comps. Point being it was priced a little high at first and the end results was selling it way below what it should be sold for. The months that went buy trying to figure out what the buyers would pay for that particular home caused it to be sold at a ridiculously low price. This hurt the sellers and the neighborhood in general as now it will become a part of future comps.
This is a lesson seller’s as well as myself can learn from. Listing a home above the market price hoping for a sale above what buyers are willing to pay, and what an appraiser will value it at usually ends up hurting everyone.