Pricing your house for sale is tricky. Selling your house is stressful; there are a lot of tasks that need tending. But pricing could be your most critical element because the price will determine whether the sale happens quickly and at a loss, fairly quickly with a profit, or if the house will be doomed to the “for sale” graveyard of doomed real estate. Here’s your ultimate guide to understanding the importance of pricing when selling your house.
- Avoiding a Bad Reputation
- The Wrong Bracket | The Bargain Backfire
- “Penny for Your Thoughts” Does Not Apply | Releasing Sentimental Value
- Fair Market Value and Returns on Your Investment
- Free Online Home Valuation Calculators
- Listing Appraisal | An Expensive Opinion of Value
- Scout it Out | See for Yourself
- Your Real Estate Agent’s Expert Judgment
- How Staging and Pricing go Hand in Hand
Avoiding a Bad Reputation
The most devastating fate for a house for sale, the worst-case scenario, is that the house sits on the market for too long.
The length of time a property remains on the market has nothing to do with the seller’s timeline – as if there’s no pressure, no worries, it’ll sell when it gets around to selling. No, that’s not the case. On the contrary, when a house stays for too long, buyers begin to recognize the fact that the property hasn’t sold. They wonder why. Two weeks later the seller drops the price and the same buyer (and a few others) notice the house is still for sale and the price has dropped. Questions begin to formulate about why the house hasn’t sold yet, why the price is dropping, and whether the delays are with the seller or with the property.
Eventually, the house should be removed from the market and given time to reset. The current group of home buyers needs to settle and a new group – a group of buyers who isn’t familiar with the story of that house, can view the home as if it’s the first time on the market – and this time, the price will be spot on!
The Wrong Bracket | The Bargain Backfire
People like to save money. Because of people wanting to save money, marketers way back in the timeline of things, discovered that consumers had a more positive reaction to a price tag labeled $2.99 than they did to a tag marked $3.00. We’re past that now. We understand that psychology and we know, but that still doesn’t stop us from occasionally trying to employ bargain marketing tactics – especially if we’re feeling the pressure to sell. But if you think of the way Internet users search the web for real estate properties, they search by location, features, and most importantly, price. When someone searches houses by price, those houses are listed in rounded numbers such as $200,000-$300,000. So, when you knock a few bucks off the caboose of your home’s price tag, you may handicap your listing so it’s not being shown to the right group of buyers.
“Penny for Your Thoughts” Does Not Apply | Releasing Sentimental Value
Whether you’ve lived in that house for two years or two decades, you’ve made memories within that space – good, bad, and ugly. You’ve laughed, cried, gone numb, celebrated, and hid within those walls. Many sellers reflect on marriages or divorce, starting families or empty nesting. Family members, during the tenure in a home, come and go – some are born, a few move, others pass away. Our homes, these clumps of brick and mortar that hold our life experiences, are our stories. But they are personal stories – so personal that others cannot feel your sentiment. They may be able to relate to the idea of cherishing memories, but they have no way to bond with the energy of a memory you made in a house they’ve never seen before and are now considering buying. There’s a disconnect.
It does not matter how many birthdays you celebrated there. You cannot charge for the number of holiday turkeys carved in your dining room. If you have pictures of each of three beloved teen-agers in prom clothes on the stairwell, that stairwell does not become more valuable. The pictures do.
When you’re thinking about setting a price on your house for sale, remove sentiment from your equation. Be thankful for your memories, tuck them away for safe keeping in a place for only you to find, and price your home according to fair market value.
Fair Market Value and Returns on Your Investment
Real estate market values are rarely the same from one moment to the next. Based on supply and demand as well as other natural and man-made factors, homes may be considered of high value and existing in affluent neighborhoods one day, and of a far lower value in a less desirable neighborhood the next week, depending on how life unfolded between Monday and Sunday in that region. Your initial purchase price of the home is irrelevant – except for those who purchase real estate for the purpose of flipping for profit. You may never get back out of that house what you paid. In fact, the reality of the difference in value may be a difficult pill to swallow, just like standing in a grocery store talking about how back in your day a loaf of bread only cost a dollar. Unless you’re selling your house as a business transaction to turn a profit on an investment made for that purpose, try not to think about what you paid vs. what you can sell your home for in today’s market.
Free Online Home Valuation Calculators
Isn’t there something just so fun about the words free and instant? You could have been laying in your tousled bed at 3:17 a.m. on an idle Thursday when the idea struck you to see how much your home might be worth. Good idea. So, you stuff your feet into your slippers and scuffle down the hallway to the computer where you begin to input data through sleepy eyes. Clickety Click. Click. Hit enter, and boom: you’ve got a dollar sign with six figures behind it as a suggested value for your home. But wait a minute. How does that home valuation calculator know what kind of landscaping your house has, or how recently it was installed? That, and other pertinent information, is missing. Although instant free home valuation calculators are convenient and can quench curiosity to a degree, they are not a trusted reliable source for pricing your home. There’s no harm whatsoever in dabbling for the sake of seeing, but see what else you can find.
Listing Appraisal | An Expensive Opinion of Value
A listing appraisal, also called a pre-appraisal, is another method for determining what your home might be worth in today’s real estate climate. You order the appraisal from an independent appraiser who will obtain certain public records data for your home such as square footage and property lines. Next, the appraiser physically assesses the property, specifically checking to see how well the materials have weathered or aged with time. The appraiser also takes into consideration any updates you may have made.
When the appraiser provides you with a report of what he or she believes your home might be worth, you may also receive a list of items that could increase the value of your home, such as torn window screens or door screens, rusty doorknobs, cracked light or electrical socket covers, leaky faucets, squeaky doors. These are all relatively small tasks in terms of time and money, but they can add thousands of dollars to your home’s over-all value.
A listing appraisal will cost you several hundred dollars out of pocket. While you’re paying for and receiving high-quality professional assessments based on experience and insights about real estate property values, the short end of that stick is that an appraisal is nothing more than an opinion; it’s an educated guess. Furthermore, because of the fluid nature of the real estate market, an appraiser’s estimate is only as good as the moment in which it was issued. However, it’s still a solid starting point for deciding how to price your home for sale correctly from the start.
Scout it Out | See for Yourself
One of the best ways for you to know what current buyers are viewing on the market of houses for sale in your area is to behave like one of them. Tour the open houses. Visit the homes for sale in your area to see how they stack up to yours. Find the houses that are most like yours in size, shape, features, and feel and then ask yourself how you feel about the price tag they have on their house. Do you feel your house is in better or worse condition than this one? Do you think your house is worth more or less, and why? Imagine yourself as a potential buyer weighing your house against the competition.
Your Real Estate Agent’s Expert Judgment
Your real estate agent should be your best ally when it comes to pricing your home for sale. Your caution is that your real estate agent works on a commission, meaning he or she gets paid based on a percentage of the sale price. For that reason, your agent is naturally going to try to get the highest price possible for the sale of your home. However, most agents also understand how time-sensitive the real estate market is and that over-pricing a house with the idea of leaving room to knock it down some if necessary is not a healthy method of selling real estate. The very best agents will provide you with specific information to support their theory, and then provide you with a low to high bracket of what your home might be worth, and let you decide.
Information your real estate agent may use includes a comprehensive market analysis, also known as a CMA. The comprehensive market analysis details recent activity in the real estate industry in your area. For example, the CMA lists all the houses that have recently sold, their original asking prices, number of price reductions, the duration on the market, and the final sales price. This can help you understand the relationships between buyers and sellers with supply, demand, and pricing. You can tell that if no houses in the area sold for $300,000 or over, then even if you originally paid considerably more, you likely won’t get that for it now.
Your real estate agent will also conduct a walkthrough survey assessment of your property to determine if there are areas where you can make minor improvements to escalate the value of your home.
When you and your agent have discussed the pricing for your home, including the combined methods you’ve used to get an understanding of how to price your home competitively, your agent should then guide you about staging your property.
How Staging and Pricing go Hand in Hand
Staging is the art of dressing your home for success, shining up your residence like you’re sending it out on a blind date. It’s decluttering, organizing, cleaning, decorating, and arranging things in such a way that potential buyers want to stay longer, learn more.
It’s hard to convince someone that a clump of metal covered in sheets of mud and debris is valuable. But you wash off the mud and clean it up to find that clump of dirty metal was a Porsche. Or, to show someone an aged Porsche that hasn’t been well maintained – paint is chipped, tires are weathered, brakes squeal, leather seats are torn. Somehow, that car no longer holds the same value as the name conjured. In other words, the way an object is presented influences the way its value is perceived.
Pricing your house for sale may be one of the most important activities in which you engage to reach that goal. The wrong price could cost you thousands of dollars for underpricing, but an over-priced property could end up becoming unsellable due to a bed reputation and stigma developed from extended stays on the market with multiple price drops. However, when you study the market, understand the trends, recognize the competition, respect the buyer, and set yourself up for success by staging the house in such a way that supports the price, you’ve mastered the art of pricing your house to sell.
This information is provided courtesy of The Eastside Real Estate Team. Keep us in mind for all your real estate needs. Call us today at 425-200-4093.