Home Pricing Mistakes and How to Avoid Them
When selling a home, your pricing strategy can make or break your chances for a quick sale. Listing at the right price can almost guarantee that a buyer will swiftly snatch up your property, while listing at the wrong price can cause your home to sit on the market for months with not so much as a showing.
Unfortunately, pricing is not a simple process, and sellers are prone to make mistakes that waste both time and money. Don't let this happen to you; instead, make a speedy sale by avoiding these six pricing errors that sellers commonly make.
MISTAKE #1: Forgoing research
Without investigating past sales in the local market, sellers tend to base their prices on hearsay or on the listing price of the house down the street, says Leslie Sellers, president elect of the Appraisal Institute. Knowing the prices of your competition is important, but in many markets, listing prices are not a good indicator of what your home will actually sell for.
"Currently in Knoxville, Tenn., you'll find that homes typically sell for 7 to 9 percent less than they're listed for," Sellers says. "So sellers who list their homes based on other listing prices are already almost 10 percent too high about what they expect to get out of their house."
TIP: Price your home based on a comparative market analysis, a report prepared by a real estate professional that looks at recent sales of homes in your area that are similar to yours. For a fee, you can also get an estimate of your home's value with a professional home appraisal.
MISTAKE #2: Hiring the agent who offers the highest list price for your home
If you ask several listing agents how much they think they can get for your house, and one gives you a significantly higher bid than the others, be cautious: the agent may be trying to "buy" your listing by suggesting an unrealistically high asking price. This practice is unethical and costs you time and money, as you'll most likely have to slash the price after your home sits on the market unnoticed for many months.
TIP: Always interview at least three agents and choose one who can back up the suggested listing price with comparable sales data.
MISTAKE #3: Getting emotionally involved
You've likely spent a lot of time, money and energy transforming your house into your home, so it's natural to be emotionally invested in its sale. Unfortunately, buyers won't have the same sentimental feelings for your home as you do, so what you think your home is worth shouldn't be a factor in determining your listing price.
"Buyer and seller emotion is an extremely difficult thing for agents to deal with, because it needs to be a business transaction," says Jay Thompson, designated broker of Thompson's Realty in Phoenix, Ariz.
TIP: Stay objective during the pricing process by focusing on statistics generated by the CMA. Don't be personally offended by lowball offers. Instead, think of them as the starting point of a negotiation that could result in a sale.
MISTAKE #4: Pricing too high from the start
First impressions are crucial when selling your home. "The first 10 days after you implement a listing into the MLS are the most important because that's when it's going to generate the most activity," says Gaye Atherton, sole proprietor of Atherton Appraisals in Knoxville, Tenn.
If your home enters the market overpriced, many buyers will overlook it from the get-go because it will be out of their range. By the time you reduce the price to fair market value, many potential buyers will have already found something else. Other buyers may initially be interested in your new low price, but they'll also see that your home has been sitting on the market for some time, which could lead them to believe there is something wrong with the home.
TIP: Price your home correctly the first time to gain the attention of serious buyers and sell faster. If getting less money for your home is not an easy thought to bear, think of all the costs associated with homeownership that you'll have to pay if your home sits on the market for several months at an unrealistic asking price.
MISTAKE #5: Overpricing because you have "time"
Sellers who aren't in a hurry often decide to test the market by listing their homes at a high price and waiting to see where the market goes. But in most markets where home prices are dropping, waiting it out may actually cause you to lose money.
"It's key to price properly right away because you have a greater chance of selling if you're just on the market," says Wendy Sarasohn, senior vice president of The Corcoran Group in New York. "Everybody wants something that's brand new, not been shopped around, and not on sale."
TIP: Sell your home faster and possibly for more money by pricing your home based on current home values.
MISTAKE #6: Chasing the market
If you list your home too high to begin with, you may find yourself making incremental price drops but never quite catching up with the market.
For instance, Thompson has had a listing in Phoenix for a year that the sellers insisted on putting on the market for $250,000, despite the fact that comparable homes in the neighborhood were selling for around $225,000. Four months and no showings later, the sellers finally decided to drop the price to $225,000. However, home values had declined significantly in those months, so the reduced price was still four months behind the market. Since then, the sellers have been reducing the price on the home about every three months, but never catching up with their competition.
"When a home has had multiple price reductions, it appears not only to be stale, but that there's something wrong with it," Sarasohn says.
TIP: List your home competitively to begin with. If you don't get any bites, don't hesitate to lower your price. Work with your agent to reevaluate market conditions and determine the fair market value of your home.