When you decide to sell your home you usually think you have a fairly good idea of what its worth, after all, you live in the neighborhood! Most of us schedule appointments with three local listing agents who we know, or we have been referred to, or maybe we have been getting their marketing material in the mail. Usually each Realtor will recommend a different sales price. Sometimes those prices are close together, but usually there are one or more Realtors who give you a much higher number, that excites you, and seems to agree with what you thought your place was worth.
Homes are often over priced?
But, if this is the case, how is it that most homes seem to sit on the market for a long time, and end up getting the price dropped one or many times? Is it just due to a slow market? But even in a slow market won’t just about anything sell if its priced right? The problem is most of us are convinced our house is worth more than all of our neighbors, for varied reasons.
So, which Realtor do you choose?
If you’re like many people, you pick the Realtor who gives you the highest price. This ‘seems’ to be a Realtor who is willing to listen to you you, and they care about putting the most money in your pocket. And if you need to drop the price later, you can easily do that later, right? Who cares? After all, everyone else does it. So go for the higher price!
Wishful Thinking Syndrome
The truth is that you may suffer from “Wishful Thinking Syndrome”, and you may be dealing with a Realtor who (knowingly or not) engaged in “buying a listing.” They “bought” the listing by suggesting you might be able to get a higher sales price than the other Realtors recommended. And the sad reality is that many times they are doubtful that your home will actually sell at the price they recommended. From the beginning they are thinking, “I’ll eventually talk the seller into lowering the price when they see we are getting no offers”.
So it seems the real estate market usually suffers from sellers who have a major case of “wishful thinking” combined with the fact that there always seems to be numerous Realtors who will accommodate these sorts of sellers.
What should happen?
During the first couple of weeks your home ‘should’ be a flurry of activity…..if the price is right. If your house is overpriced Realtors will not waste their time coming to preview it or showing it to a potential buyer. Their time is better spent previewing homes that are priced realistically that a client of theirs may actually write an offer on. When you drop your price later, your house is “old news.” You will never be able to recapture that flurry of initial activity you would have had with a realistic price. Your house will now take much longer to sell.
Appraisals may impact your sales price
Even if you do get amazingly lucky and sell at a high price, your buyer will need a mortgage. The mortgage lender requires an appraisal. If comparable sales for the last six months and current market conditions do not support your sales price, the house won’t appraise. You deal falls apart. And when your house goes back on the market, potential buyers will think you might be getting desperate, so they will make lower offers. By overpricing your home in the beginning, you could actually end up settling for a lower price than you would have gotten at a more realistic initial price.
How to price a home
When you put a realistic price on your home and it sells quickly you will think, “we left some money on the table”. You will think, “we priced too low.” Please trust me, you DID NOT. If your home is indeed worth more than you have priced it at, you will generate even more buzz. Then more potential buyers find it and the price will be bid up to its natural and realistic level.
Here is an example. If your home is worth $500,000 and you price it at $100,000; do you really think it will sell for $100,000? Don’t you think the market will work its magic? Won’t the price will get bid up to around $500,000? Of course it will. So why price the $500,000 home at $539,000, hoping for the best? Price it at $500,000. Maybe even price it at $479,000 and maybe you’ll generate more buyers and it will sell for $505,000! But, if you price it at $479,000 and it sells for $479,000; then that was all it was worth. If you priced it at $479,000 thinking it was worth $500,000; but you wanted to generate buzz and multiple offers, guess what? If the buzz and multiple offers never came, and you only got one offer at $479,000; then that is all your home was worth at that time.
It is human nature for us to want the highest price when selling our home. But, think about yourself as a buyer. Think how skeptically you look at the prices of other homes, and don’t you wonder how the seller came up with their price. Think about yourself as a buyer and how excited you get when you finally find a house that has a realistic price!
No one over pays for anything anymore, no one. Trying the old, “let’s just price it higher and see if there is at least one person out there who loves it as much as we did and will pay more for it,” never works. Those people do not exist, not in this economy anyway.
There are many excellent Realtors in each marketplace, just because they may have news for you that you do not want to hear does not make them the wrong choice to sell your house. Treat selling your home as a business decision, delete wishful thinking from your process, and you’ll find that you sell your home much faster than others and for a fair price.