Thursday, October 9, 2014

10 Costly mistakes sellers make when pricing their homes.

1. Being too emotional.
We understand that your house is your home, where you raised you family and have a lot of your life invested. But selling your home should be viewed as a business transaction, not personal. By taking emotion out of the process as much as possible, you’ll make clear and rational decisions in your best interest. Ask any successful businessperson and he or she will tell you that emotion, fear, anger, ego, and personal feelings end up costing you money!

2. Pricing it unreasonably high.
Of course the ultimate goal is to get as much money for your home as possible when it sells, but that’s not going to happen if it never sells! There’s nothing wrong with starting with a listing price on the higher end of the spectrum but home owners need to realize that the higher the price, the fewer potential buyers you will get and the longer it usually takes to sell, if at all.

3. Ignoring the “price tag” test.
Let’s say you walk into your favorite store and pick something beautiful up off the shelf. What’s the first thing you do? Look for the price tag. If it’s too high, you cringe and put the item it right back on the shelf. If the price is significant but fair, you may look it over a while as you deliberate the price versus value. But if it’s on sale, you run to the register before someone else snatches it up! It’s the same thing with selling your home. When your priced way too high, people aren’t even going to look at it, or put it right back on the shelf. That means no offers. You want your price to be in that midrange where it’s fair for the value so you attract plenty of buyers but also get the most money possible.

4. Not sparking a bidding war.
Sellers often forget that one of the best strategies is to price your home aggressively to create a bidding war. Psychologically, our consumer behavior is dominated by a fear of loss even more so than the hope for gain. Put simply, that means people will move, act, bid, offer, hustle, risk, and do just about anything to ensure they don’t lose out on a great deal. By pricing your home a little lower on the range of what’s fair and reasonable, you create a massive sense of urgency with potential buyers. They know others are looking at this great deal and they need to put in the highest possible offer to get the home. You’ll probably get multiple offers, which can be leveraged against each other to bring the listing price up even more. Done correctly, a bidding war will get your home sold quickly and yield fantastic offers – often well over asking price!

5. Not listening to the market.
When we list a home, we do a comprehensive market analysis to present to the seller, showing the hard data exactly what similar homes in the same area are selling for, as well as what other competition is out there. We’ll make our best professional recommendation on the listing price, but the final decision is up to the homeowner. No matter where you set your initial listing price, pay attention to what the market is telling you – what the data says. Ignoring this and making decisions on emotion, fear, or hope for gain can be very counterproductive and cost you in the long run.

6. Not realizing price reductions can work to your advantage.
Price reductions are often viewed as nails-on-chalkboard negative by home sellers, but in fact they are a valuable strategy that ensures they yield the highest possible sales price. When listing your home, we should set an initial price aggressively but also map out a strategy and timetable of price reductions. If there is little interest or offers within a certain time frame, it’s time to reduce the price until we find the “sweet spot” of price vs. value! Once you price your home in that sweet spot, you’ll get plenty of quality offers at the best possible realistic price, and actually close on the transaction. Handled correctly, price reductions are a great tool to test the market incrementally, create momentum, and make sure every possible dollar lands in your pocket when it sells.

7. Forgetting to think from a buyer’s perspective.
Instead of thinking, “This is what I want for my home,” and “I want to sell at this price,” try to put yourself in a potential buyer’s situation. Imagine yourself hitting the home buying circuit on a busy Saturday and how you would view each listing. For instance, buyers usually start from the bottom of their price range and then work their way up, and as a home seller, realize they will be viewing a lot of other listings in the same price range as your home – your competition. Understanding the process from a consumer’s perspective will help you strategically set your price to get the highest and best offers from those busy buyers!

8. Pricing it based off the wrong comparables.
Homeowners are eternally optimistic when it comes to selling their home at the highest possible price, but often times they are using incomplete or irrelevant data to make those decisions. You’ll often hear people say, “My neighbor sold their house recently and it went for XYZ price, so mine should at least be worth that, if not more.” But crunching the numbers, we might find that their neighbor’s house was much larger or sold two years ago. When gauging your home’s value, look for comparable sold properties that were most similar to yours in square footage and amenities, close or in the same neighborhood, and those that sold most recently. That should give you the most accurate representation of what the fair and realistic listing price should be.

9. Forgetting that the home will need to appraise.
Remember that a buyer can make any offer they want, but they most often will need to get a mortgage loan from their partner in the home purchase – the bank. The bank, looking to ensure their investment, will require an appraisal. Appraisers are in the business of rationally and logically valuing homes based on every possible factor, and know the market better than just about anyone. So when you set your listing price, remember that what you want for it isn’t as important as what it will appraise for – which sets the ceiling on what any buyer can and will pay.

10. Trying to inflate the price based on upgrades.
You’ve probably spent many weekends fixing up your home, painting, installing new tile floors, and upgrading all of the light fixtures. While these improvements do enhance the value of your home, don’t expect to get back what you put in dollar-for-dollar. Some upgrades pay off big – like remodeling kitchens and bathrooms- but you can’t automatically tack on the price of all renovations and upgrades to your listing price and expect the seller to go for it. They will, however, make your home much more attractive to potential buyers when you list the home, and that will yield more offers at higher prices.

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