7 Bogus Pricing Myths Sellers Shouldn’t Fall For …
Weighing sellers' expectations against market realities can be a delicate dance. Here are a couple of key takeaways:
Sellers tend to overprice and spend a tremendous amount of effort trying to defend their price, even if the market doesn't support it.
Pricing a home correctly is a partnership between sellers and their agent, not a battle of wills.
When it comes down to it, the most important advice a real estate agent can give sellers is how to price their home. No matter how beautiful or well-maintained a property may be, how many upgrades it has or how well it shows, if a home is not properly priced, it’s going to be next to impossible to sell.
The battle for agents most often lies with aligning what sellers think their home is worth with its true market value. These disparate realities can be difficult to merge when working with a seller to set a list price or on a price adjustment. Here are seven pricing myths that often get in the away.
1. Let's Price High - Buyers Can Always Make An Offer
Well, not quite. If a home is overpriced, a seller risks losing potential buyers who aren’t stretching their search into an uncomfortable price range.
The asking price sets the stage and may invite or dissuade buyers based on the dollar amount. Just as you would painstakingly prepare your home for sale, you never get a second chance to make a first impression price-wise.
2. If Our Home Is Priced Right We Risk Leaving Money On The Table
Actually, the opposite is true. A well-priced home tends to generate a lot of interest and can result in multiple offers.
A shorter marketing span brings strong offers that could result in a home selling for over asking price. Buyers are less likely to play “let’s make a deal” and nit-pick every little thing; they feel the urgency of competing with other interested parties for the same house.
3. Home Values Appreciate - If It Doesn't Sell This Time We Can Re-List
It has been said before, but it needs to be said again: A home that sits on the market too long actually loses value. Sellers should avoid languishing on the market at all costs, it's financially dangerous!
The longer a home stays on the market, the more likely buyers are to question its value. Subsequently, any offers that come in tend to be perceived as too low by an already-frustrated seller who thinks there weren’t any buyers for their home while it was on the market the first time.
Waiting to re-list again may mean competing with other houses on the market that are both nicer and offer more bang for their buck. Furthermore, the additional carrying costs of a mortgage, maintenance and upkeep as well as the possibility of needing to make repairs to an aging roof or AC system eat into the profitability of commanding a better price next year.
If the home is somewhat dated on the inside, price out the cost of replacing granite counters, updating appliances, repainting and other upgrades, and it will likely be much less expensive to adjust the price without as much hassle.
4. This Is The Lowest We Can Go - We Don't Have To Sell
Just like the stock market, the real estate market is cruel, unkind and uncaring. Never, never, never put your home on the market just to see what you can get, your home will suffer the financial consequences. The offer you're looking for will never come and you'll pay the price of sitting on the market too long. Motivation is a key factor in selling. The only time you should ever consider putting your home on the market is when you're absolutely serious about getting it sold.
When faced with an offer that is less than what they want, sellers love to draw a line in the sand and dig their heels in over an arbitrary number that they deem to be “their bottom line.” Who decides what a property is ultimately worth anyway? Buyers see the glass as half empty versus half full, but the reality is, often buyers are the ones holding the cards, particularly in the higher price ranges.
Sellers can decline an offer based on a number, but they may never get there with another buyer, and a subsequent offer may be lower or layered with conditions and complications.
5. The Biggest Myth: The Buffer For Negotiation
The belief that a seller should price high because the market will come in way too low is a dangerous pitfall. The fact is, if your pricing is correct and the market perceives your home represents good value, statistically, your initial offer should come in around 96% of asking price.
Pricing a home too high to account for the "buffer" pits your home against houses with more features and benefits in a higher price range which represent far greater value to the market. If your home is competing with other houses which are out of your league you will lose that battle every time and suffer the frustration of your home not selling.
Sellers can sometimes be disappointed at the initial price when an offer eventually does come. Try to remove your emotions when evaluating any offer, treat your decision-making process as a cold hard business decision devoid of all emotions. We know that's easier said than done, but it will make your decision a whole lot easier with way less stress in an already stressful environment.
You must ask yourself: "Does a seller really think a buyer is going to be generous with their initial offer?"
Unless it is a really hot property, priced aggressively or in a low-inventory market, no buyer is going to willingly offer more than they have to, especially on a first pass. They want to get a sense of the seller’s flexibility or lack thereof before deciding their next move.
6. Outdated Features Should Not Impact My Selling Price
So, the home has “upgrades” circa 1990 with white melamine cabinets, beveled edge laminate counters and builder grade 12-by-12-inch tile with brass fixtures, and the seller expects the buyer to pay full asking price or close to it?
Reality Check ...
The buyers are looking at how much they are going to have to spend to bring the home up to today’s standards and are going to deduct accordingly when formulating an offer.
7. To Counter Or Not To Counter: That Is The Question
A bird in the hand is worth two in the bush. A buyer has stepped up and put pen to the paper with a proposal. An offer is an invitation to negotiate and begin discussions about the property.
It can be easy to get offended, but it’s best to keep emotion out of negotiation as much as possible and work in good faith with what’s presented. A seller will learn quickly if it looks like a deal may come together.
Pricing a property is a delicate dance. The bottom line is that the market doesn’t guarantee as strong a price as sellers usually want or expect — unless the home is a highly sought after property in a tight real estate market.
Setting the stage with the right pricing will often set the tone for how smoothly the listing experience will unfold. Your agent should provide you with the professional guidance and advice you need to make your pricing decision from a position of knowledge and strength.
Contact Elegant Homes and Gardens
We certainly hope you recognize the complexities of selling your home. It's also our sincere hope that, when you need the professional guidance and advice to facilitate the successful sale of your home, you'll contact Bob Reid to achieve your real estate and financial goals in your transaction.