Sellers often have misconceptions about how to
estimate value.
Here are factors to consider and factors to ignore.
Factors to Ignore:
Your cost. If your house were a gift (your cost, zero), would you give
it away?
The amount you spent on improvements. You put in a pink tiled kitchen.
It cost you $15,000. You’re unlikely to find a buyer who will pay $15,000 for a pink
tiled kitchen. Matter of fact, the buyer may want to “remodel” your remodeling.
Reproduction cost. This is the amount used for property insurance
purposes. Reproduction cost measures how much money it would take to make an exact
“replica” of your house if it were rebuilt from the ground up. It’s of
little value in determining your selling price (except in the case of a newly built home).
Assessed value. Taxing authorities use assessed value to levy property
taxes. Assessed value rarely reflects market value.
Your needs. It doesn’t matter how much money you need to take out
of your current home. You require $25,000 profit (net) to purchase your next home. You
can’t move unless you have this amount. Still, these needs can’t be used as a
basis for pricing.
Emotion. Your son grew up in this house. Your daughter started
kindergarten here. None of this makes your property worth more.
Factors to Consider:
Market comparables are the most important key to proper pricing. (In
other words, see what similar homes have sold for within the past year.) Call LeAnn Conrad
today at 452-1234 to have a FREE no obligation what-so-ever market analysis done.
Find out what your likely sales price will be.
If I'm out of the office, please leave a
message, name, and phone number. You are important to me! I check
messages continuously and will return your call as soon as possible. Please feel free to
let me know when it is convenient to reach you.
Urgency of sale. The rule of thumb for selling is to… Reduce your
asking price in proportion to your need for a quick sale. Need to sell fast? Then reduce
price.
Competition. Did a large employer just leave town? Now the market is
flooded with houses in your price range. You will need to discount to find a buyer.
OR… Are there few homes for sale in your highly desirable location? Your price can be
slightly higher because of “scarcity”.
Special financing. Does your home have a VA or FHA loan that can be
assumed at a low interest rate? OR… Are you willing to finance the sale of your home
by taking back the mortgage? (If you own your home free and clear and would not mind
receiving monthly payments, owner financing / taking back a mortgage is worth considering.
As a result, you may get your full asking price or more.)
Overprice and You Lose
If you overprice, you will lose
buyers. It typically takes 3 months to replace the current pool of buyers with new ones.
Real estate agents will use your overpriced home to sell a fairly priced home. Even though
you and your agent know you will settle for $10,000 less, buyers don’t know that. By
law, your agent can’t tell buyers you will take less.
Surveys prove that the longer a house
is on the market, the greater the discount from list price. Buyers begin to
“suspect” something is wrong with your house because it won’t sell. In
general, overpricing means it takes longer to sell the home. You end up with a slow
frustrating start, wasted advertisements, and a property that appears to be “damaged
goods”.
If you do find a buyer willing
to pay your price, you still have to worry about the appraisal. The buyer’s bank will
send out an appraiser to estimate the property’s value. It doesn’t matter that
you and the buyer agree the house is worth $100,000. If the bank’s appraiser
estimates the home is only worth $90,000, the bank will offer less money for the loan, and
the buyer may not be able (or willing) to complete the purchase. You end up back at
square one… looking for a buyer.
The solution is simple… Don’t
Overprice and You Win!
How Sellers Set Their Asking Price
Here are 4 common strategies buyers will start to
recognize when they begin to view homes:
1. Clearly Overpriced.
Every seller wants to realize the most amount of
money they can for their home, and real estate agents know this. If more than one agent is
competing for your listing, an easy way to win the battle is to overinflate the value of
your home. This is done far too often, with many homes that are priced 10-20% over their
true market value. This is a lose lose situation for a seller.
This is not in the seller's best interest, because
in most cases the market won't be fooled. As a result, the home could languish on the
market for months. This creates problems for the seller in that:
·
the home is likely to be labeled as a "troubled" house
by other agents, leading to a lower than fair
market price when an offer is finally made
·
the sellers have been greatly inconvenienced with having to
constantly have their home in "showing" condition... for nothing. These homes often expire off the market, forcing
sellers to go through the listing process all over again. This time with a major price
reduction.
·
In the Winona market... if a listing expires, even if the seller
relists with a different Realtor, the days on market does not reset back to one. Your home
has now become "shopworn".
Buyers become wary of homes that have been on the
market for a long time. This occurs most often because the seller's asking price is too
high.
2. Somewhat Overpriced.
About 3/4 of the homes on the market are 5-10%
overpriced. These homes will also sit on the market longer than they should. There is
usually one of two factors at play here: either the seller believes that their home is
really worth this much despite what the market has indicated (after all, there's a lot of
emotion caught up in this issue), OR they've left some room for negotiating.
3. Priced Correctly at Market Value.
Some sellers understand that real estate is part
of the capitalistic system of supply and demand and will carefully and realistically price
their homes based on a thorough analysis of other homes on the market. These competitively
priced homes usually sell within a reasonable time-frame and very close to the asking
price. As a seller, you will achieve the best results by pricing correctly at market
value.
4. Priced Below the Fair Market Value.
Some sellers are motivated by a quick sale. These homes attract multiple offers and sell fast -
usually in a few days - at, or above, the asking price. |
