Pricing Your House
You’re ready to sell your house, and you think you have a good idea of what it is worth. Being a sensible seller, you schedule appointments with three local listing agents whose ads have been popping up in your mailbox for years. Each agent comes prepared with a “Competitive Market Analysis” on fancy paper, and each recommends a specific sales price.
Amazingly, two of the agents suggest prices that are lower than you expected. Although they back up their recommendations with recent sales data of similar homes, you remain convinced that your house is worth more. The third agent’s figures are more in line with your anticipated value. You hire the third agent.
You may have fallen victim to an agent who “buys your listing.” Agents know that sellers might interview other realtors. They also understand that all sellers want the most dollars out of the house, and are afraid of profiting less than they should. Enter the agent who tells you that your house is worth more than it is. The agent gets the listing, and when the house does not sell over the next few months, most sellers do not want to jump ship and start over with a new agent. The same agent then lowers the price of the house, probably to what it should have been to begin with. By now, your house has been sitting on the market for too long to be truly competitive. The agent has the listing, however, and is willing to wait it out until it sells.
When listing your house, you must attract the greatest number of buyers right away, capitalizing on the momentum of a brand new listing. Contrary to popular opinion, the listing agent does not usually attempt to sell your home to a homebuyer. That is simply not very efficient. Listing agents market and promote your home to the hordes of other agents who work with homebuyers, dramatically increasing your personal sales force. During the first couple of weeks, your house should see a flurry of activity, with buyer’s agents coming to preview the property so they can discuss it with their clients. If the price is right. If you overpriced, fewer agents will preview your home. After all, they are Real Estate Professionals, and it is their job to know local market conditions and home values. If your house is above market, why waste time? Their time is better spent previewing homes that are priced correctly.
Present a house that is priced right and that shows beautifully. It is tough to make up lost ground when you started off with a price that is too high. Lowering the price may get the house sold, but there is stigma attached to “price reduced,” and many buyers or agents may never find out about the reduced price if they saw the house a while ago and have moved on. By the time you drop the price, the house is “old news.” You will never recapture that flurry of initial activity you would have had with a realistic price.
Even if you do manage to sell at an above-market price, your buyer most likely needs a mortgage. The mortgage lender requires an appraisal. If comparable sales for the last six months and current market conditions do not support your sales price, the house will not appraise for the sales price. Then your deal falls apart. Once your home has fallen out of escrow and has been on the market for a while, it is more difficult to obtain good offers. Potential buyers may assume you are getting desperate, and will make lower offers. By overpricing your home in the beginning, you could end up settling for a lower price than you would have received if you had priced correctly from the first day.
Numbers don’t lie. If an agent shows you comparable sales that indicate a lower price than you had hoped for, believe the data.