5 Home Pricing Myths Debunked
Every seller wants to sell their home for the best possible price – and hopefully as quickly as possible. The following five myths are commonly accepted as truth among many homeowners. You don’t want to make the mistake of thinking these things are true, because they aren’t. Belief in these myths play a large part in why many sellers fail to get the most out of their home sale.
Quick Offers Mean the Home is Priced Too Low
The moment your home is listed on the market, it will be seen by multiple buyers. Depending on the area, it could be hundreds or even thousands of shoppers that at least skim by your listing as they filter through all the possible homes they could buy. If you’ve accomplished pricing your home right, many of these buyers will be interested in it immediately. These buyers may have been shopping for weeks or months, looking for a home like yours at a competitive price point
With the right price in the right market, you could get multiple offers in a very short amount of time. This is especially true when there are a limited number of homes available to purchase. Inventory levels will often dictate how quickly a home receives an offer.
You want offers on your home – from multiple buyers if possible. With multiple offers, you can encourage competition among buyers. You obviously do not want to price your home lower than it is worth, but you do want to price it low enough to get buyers excited and making offers.
The key is finding the broker you can trust who knows how to price a home for sale without leaving money on the table!
We Just Need the Right Buyer
“We just need to find the right “California” buyer to sell our home for a great price.” I can’t tell you how many times this has been said in a listing appointment. But just like more time on market will not encourage higher offers, finding the one-in-a-thousand buyer that will overlook the advice of his or her real estate broker and ignore the realities of the market is extremely unlikely
The market is what it is because of supply and demand, of all the available houses and all the possible buyers and all the transactions taking place. For a purchaser to go far outside of the norm and buy a home for far above market value is unusual because it is not a sound financial decision.
Another thing to consider is that the lenders verify the market value by the appraisal. Even if a buyer is foolish enough to try and buy an overpriced house, there is a high chance that the lender will deny the loan due to the price. This will be due to a low appraisal value on the property. The appraisal is not done for the buyer’s protection, although it may benefit the borrower, it’s done for the lender’s protection.
We Need More Negotiating Room
Needing to price a home with significant “negotiating room” is a very common pricing myth. Negotiation is an essential part of the sales process; there is no denying that. Your Realtor should be prepared to negotiate on your behalf to help you get what you want out of the sale, and to keep you from being taken advantage of. But pricing a home excessively high is not necessary to create an opportunity to negotiate and reach a middle ground. Yes, you can expect buyers to make an offer below your original price in many instances. Buyers will expect to have to negotiate up. But the negotiating room does not have to be substantial.
Trying to price to create a lot of negotiating room will result in not getting the chance to negotiate in the first place. When a home is priced too high, it will be avoided by buyers and their agents. They will all be waiting for the price to go down to something reasonable. If you wait very long, you will run into the problem of buyers thinking something is wrong with your house.
Choosing the Correct Asking Price
The home seller is vulnerable when it comes to pricing their home, as it is emotional! Plus, the seller has invested time, money and energy in most cases improving the home.
Then comes time to interview the different brokers. Here is what I call the stardust in the eyes. Sometimes agents will encourage a higher price creating the stardust effect. This makes the sellers feel good and gets the agent a listing. Is this really in the best interest of the client? It is easy to get caught up in the excitement over choosing a sales price. Unfortunately, sellers often choose the listing agent who suggests the highest list price, commonly a mistake many sellers make when picking their agent.
The truth is it doesn’t matter how much money your agent thinks it’s worth, or what any agent thinks. The people whose opinion matters are the buyers in the market who can make an actual offer. The selling price will be subject to market conditions, the property’s location, size, and the competition at the different price points. In other words, there is no hard and fast price tag to slap on your home. It’s only an educated guess. Having an experienced agent and a seller working together is always the best approach when pricing a home for sale.
Waiting Longer Makes Better Offers Appear
A few common comments made by some sellers, “We have time to wait things out,” or my personal favorite, “I don’t have to sell.” I always tell my clients there is no magic button in the background of the listing that tells the Realtor or buyer that you don’t have to sell.
Like clockwork – the longer the home stays on the market, the lower the offers will get, or even worse, no offers at all. As a home sits on the market week after week, buyers start to wonder what’s wrong with it. Why has it taken so long to sell? Many buyers spend months looking through listings while they are getting their financing ready, job transfer going, downsizing, or their home sold, especially out of state buyers! They see your house when it first goes up, and then the next month, and then the next. Eventually they assume that the pricing is too high, or there is something seriously wrong with the property.
Homes sell for the most money when they are on the market for less than 30 days, for price ranges less than $325,000, the FHA loan upper price limit.
Ideally, in 60 days or less for sales in the higher price points up to $500,000. Above that, you’d better be priced right because the number of buyers versus inventory is huge.
Let me give you a small example from one point in time. As of 7-1-19 through the MLS system in the combined area of Central Point and Eagle Point, going back one-year, for homes over $500,000, there were 14 closed sales in that period. There were nine pending sales in those two areas as of 7/1/19. If I pretend the pendings were closed, then that would bring the total to 25 sales in 12 months. There were 50 homes in those two areas for sale over the $500,000 price point. So, that gives an average of 2 closed/pending sales per month and with the 50 homes currently for sale that is a 25 to 1 competition rate for the sellers. Pricing will always be very important.
The number one question all buyers ask their real estate agent is “How long has the home been on the market?” Buyers ask this question for one reason – they want to know the likelihood a seller will negotiate and by how much. Right or wrong, the general assumption with most buyers is the longer a home is for sale, the more negotiating room there is, and to be honest that usually proves true.
Time on market is not a seller’s friend! As the days on market increase, history shows that the gap between the listing price and sale price grows. The risks of overpricing a home are substantial. Many sellers think they can drop the price later, and it won’t matter. It will matter! If you overprice your home, the odds dramatically increase that you’ll sell it for less than you would have if priced correctly on day one.
Pricing a property is a skill an art, sometimes easy and other times not so easy, depending on the property. The price is the most important consideration for getting your home sold. If you get the price wrong, nothing else you or your agent does will matter. Setting the right price is a crucial part of marketing a home, and I believe the most important first step. The correct price attracts the right buyers and stronger offers.