24 October 2014

Your House Usually Isn't Worth As Much As You Think

That is a really good opener to win a popularity contest with sellers, right?  

But it is a situation sellers and their Realtors face daily, and believe me, I had my share of those moments. Excellent advice on how to tackle pricing properly appeared yesterday in the newsletter Realty Times:

Your house is super badass. It's easily the nicest home on the block. Great updates and a corner lot. You're going to make a fortune when you sell. You might even set a new record for the neighborhood.

It's all about making as much as you can, right?

Especially in a Seller's Market. Those two words get everyone that's about to put their house on the market all giddy. But "seller's market" doesn't mean license to be a real estate snob.

Somewhere between what the last people paid for a house like yours and the highest price suggested to you by a REALTOR - that's your sweet spot. But pinpointing it isn't always easy. Here are five tactics that will help.

1. Choose the right agent

The right agent is not necessarily the one that wants to list your home for the most money. In fact, an agent whose recommended list price is significantly higher than the other agents you are interviewing may be a red flag.

"Local agents have an inside track on what local buyers care about and what they will and will not spend. Talk to your agent about it, but don't forget to actually listen to and consider what your agent has to say," said Forbes. "If you don't trust what an agent is telling you about where you should list your home, talk to several agents -- if the consensus is a recommended list price range lower than what you had in mind, that's a sign you should reconsider."

2. Get comps

Comps, otherwise known as comparables, will tell you what other houses are selling for. It will also show you a pattern of sales trends over a period of time. But it can also be dangerous for anyone seeing dollar signs above all else.

If you're tempted to price your home high, check the comps, said Forbes. Active buyers do not "want to overpay for a home, and most will view your home as overpriced and not worth the hassle (or the haggle) if it is out of whack with the recent sales prices of similar homes. Similarly, appraisers will use these numbers when figuring out your home's value. Even if you do get an offer at a higher-than-justified price, if the buyer's appraiser finds that your home is overvalued compared to other nearby recent sales, it can cause major delays in your buyer's mortgage process -- or derail it altogether.

The bottom line:  Heed your agent's advice... he/she will be able to delve deeper into the trends and provide further context around them. Which brings us to:

3. Listen to your agent

You probably already have a good idea of the price you want for your house. But is it based on reality or is it simply a number that sounds good? Perhaps it's what you need to comfortably get out of your house and into something bigger. But that doesn't mean you'll get it.

A local seller not listening to the market for nine (!) years; cs = last sale date

"Here's a real estate fact that every home seller should know: Buyers determine the right price for a property, not sellers," said the Washington Post. "The market price for a home is determined by what an able and willing buyer ultimately pays for it. There are certainly things that homeowners can do to influence buyers' perceptions of their home's value and hence increase the price buyers are willing to pay for it. But, ultimately, the buyers will set the price."

4. Do additional research

In today's day and age, you can easily gather a mountain of information to help you understand the market in general, and, specifically, the market in your neighborhood. Pay special attention to the number of homes on the market in your projected price range. The more inventory, the more competition, the more pressure to make sure your home is priced right.

5. Consider the consequences

Pricing too high is a danger in that a house that sits on the market unsold will eventually have to lower its price. Chasing the market down is not something any seller wants to do. Plus, the longer a house sits on the market, the more momentum it loses from being a new listing. And all of this means one thing: money lost.

"Making a mistake on price can cost sellers thousands of dollars…not by under pricing the value of the home, but by overpricing it," said NH Homes.

Pricing right, or even lower, thereby creating interest (and possibly even a bidding war), is the easiest way to get your home sold. Your fear of leaving a few thousand dollars on the table upfront should pale in comparison to what could happen if you can't sell quickly, or at all, at your "preferred" price.

What is your experience in pricing a home for sale? I would love to hear your input.

Article ©Jaymi Naciri for Realty Times, photo illustrations ©tckaiser

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