Myths That Make You Overprice Your Home
It may seem difficult to price your home. Especially since the sentimental value may be high. There is also the fact that you want to make a profit, of course. Let’s not forget all that money you shelled out to install a swimming pool or a half-bath that now needs to be recouped, because you’re leaving the house in better shape than when you bought it. Right?
Well, not necessarily. Far too many sellers fall victim to myths about home pricing that, at first, seem to make sense, but don’t coincide with the real estate markets today. We’ve put a list of some of the most common myths that may cause you to overprice your home.
1. You will always make money when you sell.
Most often, real estate tends to appreciate over time: The National Association of Realtors® estimates that home prices will jump 5% by the end of 2017 and continue rising 3.5% in 2018. But there are no guarantees that you will sell your home for more than you paid for it and where you live can greatly affect the return on your investment.
The NAR also found, for instance, that the cost of single-family homes increased in about 87% of the cites it studied, but prices actually dropped in 23 markets. Don’t assume that you will make a profit until you’ve done your homework.
2. Price high to make big money.
You may be thinking: “Hey, it’s worth a shot!” Well, many sellers make the mistake of starting out high with plans to come down in the negotiations. That may not be the best way to start your home selling mission. In fact it may cause your home to go unnoticed because the real estate agent or the buyer many type in a “max price” into their search, for example, you know that you should list your home at $200,000 but you decide to list at $230,000 to have negotiating room. Buyers may type in $200,000 as a maximum price and your home will not be seen. Do not shoot yourself in the foot by trying to outsmart the market.
“While the payday might sound appealing, you’re actually sacrificing your best marketing time in exchange for the remote possibility that someone will overpay for your home,” says Kathleen Marks, a Realtor® with United Real Estate in Asheville, NC.
It’s possible certain buyers might be suckered in to seeing your home, but an experienced agent will know right away that the house is overpriced and this can lead to problems down the road (next myth will show this).
3. If your home’s overpriced, lower it later.
As mentioned in the previous myth, starting high with the intention of coming down later is not a good idea. One reason in particular is that an overpriced home tends to sit on the market longer than would a fair priced home. Most listing sites show the “Days On Market” and to a buyer, a home that has not sold may mean something is wrong.
Frankly, “Price your home appropriately from the beginning for your best shot at having a quick and easy sale,” Marks recommends.
4. Pricing your home low means not much money.
Have you ever heard of a bidding war? Well sometimes if your house is competitively priced, it may drum up tons of attention. You may end up with 2 or 3 buyers fighting over your home. This can give you much leverage when it comes to which fees you may or may not have to pay for and that will mean more dollars in your pocket at close of escrow.
5. You can add the cost of any renovations you’ve made.
This myth can be tricky. Let’s say you added an island in your kitchen to increase counter space and when you determined your listing price, you decided to factor in the cost of the addition because you see it as an improvement. This means you added an extra $10,000 because that’s what the island set you back. Along comes Mr. and Mrs. Smith who like the layout of your home except for the fact that they want an open spaced kitchen. They decide to put in an offer and deduct the amount that they think it would cost to remove that pesky island.
This just means that what you see as an improvement, some buyers may see as an obstacle.
The reality: While your renovations might see some return on investment, you’ll rarely recoup the whole amount. On average, you can expect to get back 64% of every dollar you spend on home improvements. Plus, that profit can vary greatly based on which renovation you do.
6. A past appraisal will help you pinpoint the right price.
An appraisal attributes to your home a value based on market conditions at a certain date, so it becomes old news very quickly. In fact, lenders typically won’t accept appraisals that are more than 60 days old.
“Since lenders know markets can change in six months’ time, it’s important for sellers to understand that a previous appraisal is never a reliable source for the current value of a home,” Marks says.
7. Your agent might overprice the house to make a bigger commission.
“Don’t even go there”, says Realtor Raena Janes of RJHomes in Tucson, AZ.
“While it’s true that an agent’s commission is based on the selling price of a house, the disparity will end up being negligible,” she says. “For example, the difference in commission between a $300,000 house and one that’s $310,000 is about $150.”
“No real estate agent is going to lose a sale for the sake of a couple hundred dollars,” she explains.
There is also the chance that the agent may not get your house sold just for trying to make an extra dollar. Simply put, your agent wants to sell your house just as much as you do, maybe more.