19 home pricing mistakes that sellers should avoid at all costs
Topic: Buyer And Seller Resources, Rural Living Blog
To someone who only sells a home every few years or so, pricing might seem more like an art than a science -- you take one part current market activity, one part home value and one part luck and arrive at a number that seems right. Right?
Well, it’s probably true that anybody can price a home. All you need is a number and the ability to list it on the MLS, after all. But pricing a home that will sell in a specified timeframe? That takes more than just the ability to name a number, and there are pitfalls that inexperienced home-pricers won’t know about until they’ve had to clamber out of one (or more).
Here are the biggest, most common pricing mistakes that every home seller should avoid.
1. Pricing too high so the seller can “negotiate down”
This is the first mistake on the list because it’s the most common -- and it loses sellers thousands (sometimes tens of thousands) of dollars before they wise up.
There’s really only one time when a home on the market gets a ton of attention from serious buyers: When it’s first listed on the MLS. Those first 24 to 48 hours after listing will see the most traffic from qualified, ready-to-move buyers.
If those buyers think your house is overpriced, then you’ve already lost your chance. They won’t be watching your listing eagerly waiting for the inevitable price reduction -- they’re busy touring properties and making offers on homes that are already in their price range.
When you price a home too high with the plan of “negotiating down,” you’re squandering hundreds of pageviews from buyers who might have put in an offer if you hadn’t had your head in the clouds.
[caption id="attachment_978" align="alignleft" width="300"] Photo by Dominik Scythe on Unsplash[/caption]
2. Trying to get full value for additions or upgrades
Even though prices might be skyrocketing in your market, the shape of your house is not necessarily keeping up with those shifts. Yes, your kitchen might just be two or three years old -- but that means you’ve been cooking and storing food there for two or three years!
Odds are that nothing in your home is brand-spanking-new anymore, so don’t think to charge a buyer like they’re walking into a pristine, untouched environment. The buyers who are willing to pay for brand-spanking-new are talking to new construction developers, anyway; they’re probably not seeking out your existing home (although we’re sure it’s lovely).
If you added a feature or upgraded a room in your home, consider the wear-and-tear you’ve unleashed on it in the interim and price accordingly.
3. Turning a blind eye to outdated fixtures and features
By that same token, we know you saw that adorable story about the listing straight out of the 1950s that hadn’t had a thing changed and sold for a premium price.
Unless your home is a vintage showcase, you won’t be able to do the same. The nostalgia for 1970s or ’80s decor hasn’t nearly reached its peak, so if you’re usually the last on the block to renovate or update, that should be reflected in your sales price. The buyers might want (or need) to make some changes themselves, and charging the full market price for a property that the buyers will want to update means you’ll probably be waiting a long time for those buyers to materialize.
4. Pricing according to the sellers’ needs -- not the market’s
It’s easy (and tempting) to think that you can price according to your own financial situation and needs -- but that simply isn’t the case. Many sellers approach their sale with an understanding of their own outstanding mortgage loan balance and a determination to secure at least that amount.
Although it makes perfect sense that a seller would want to recoup the investment in the home, that’s not always sensible in every market. A home is worth what the market dictates and what a buyer is willing to pay for it, and that is in no way influenced by the amount of equity you have in the home or how much you still owe on the loan.
Hopefully you’ll be able to net enough to make the sale worthwhile -- but if what you need is above and beyond what the market will provide, it’s not the market’s fault.
5. Worrying about “leaving money on the table” with a priced-to-sell home
There’s something that happens to us psychologically when we get ready to sell an asset -- any asset, but it’s probably most acute with a home, our biggest asset. We start to worry that we might be making a mistake by pricing it to sell because “I might be able to get more than that!”
With a home, though, this is a mistake. (See Mistake No. 1 again!)
When you price a home to sell, buyers who can afford to buy it will flock to see it. If you wait for a short period of time -- say, a week -- before you’ll start accepting offers, that gives the buyers enough an opportunity to decide they want to put in an offer, and it’s likely you’ll get more than one. That could mean above-asking-price offers or even bidding wars in a really hot market.
You definitely won’t find buyers engaging in a bidding war for an overpriced property in most markets, though.
[caption id="attachment_979" align="alignright" width="300"] Photo by Jakob Owens on Unsplash[/caption]
6. Waiting for the market to “catch up” to the price
Beyond sacrificing the bulk of the internet and MLS “serious buyer” attention that your home is likely to attract, when you let a home linger on the market because you think you have all the time in the world to wait for the market to catch up to the price, you’re doing something arguably even worse: Encouraging buyers to wonder what’s wrong with that house no one will buy (or what’s wrong with you if you won’t lower the price).
It’s probably not wise to position your house as the “weird one that won’t sell” that’s been on the market for months. And maybe you enjoy living your life as a perpetual seller -- constantly prepared for drop-in appointments from random people who might not buy your house or even leave feedback -- but most people do not.
7. Allowing emotion to run the show
We know -- you bought the home as newlyweds and carried two newborns into their bedrooms before you were ready to let your adorable first dream home go. To you and your family, it’s worth its weight in gold.
Unfortunately, no buyer is likely to agree. So you shouldn’t ask them to make a huge financial decision based on the emotions you carry for the property they might buy.
8. Only countering offers that come close to the asking price
An offer is just that -- an offer to pay a certain price for a home. It isn’t a binding arbitration -- it’s more like an overture, an invitation to negotiate.
However, some sellers might feel as though there’s no point in countering some offers. They’re simply too low for you. But that doesn’t make sense: If the initial offer is an overture, what’s the harm in countering with something more realistic for you?
If the buyer can’t do it, then he or she will walk away; but if it’s possible, you just might have yourself a sale.
9. Thinking a high price always means more money in the seller’s pocket
If a house is overpriced when it’s first listed, then who knows how far that price will have to drop before it snags the attention of a qualified buyer. There’s real danger in overpricing your home.
On the other hand, pricing a home perfectly to the market means fewer price reductions, a faster sale (fewer mortgage payments on a listed home!), and in a seller’s market, it will trigger enough buyer interest to generate multiple offers, if not a bidding war.
10. “Pricing low to sell high never works”
This isn’t a good idea in every market, of course, but in a seller’s market with very few properties for sale, buyers will circle around a reasonably priced home like the proverbial sharks smelling blood in the water. When you have more qualified buyers in this environment, not only is your sale more likely to go through, but you’re likely to get more than your list price, too.
[caption id="attachment_980" align="alignleft" width="200"] Photo by Clem Onojeghuo on Unsplash[/caption]
11. Establishing a “price bottom” below which the seller won’t sink
It might make sense on the surface to decide that you just won’t go below a certain price -- but you could be blowing up the deal inadvertently. It’s possible that the perfect buyer for your property has a very real income-based and down-payment-based ceiling that’s below your floor, and if that buyer is able to match you in concessions and timing and every other aspect, then you should consider moving it.
Better yet, try not to give yourself a “floor” in the first place -- especially if it’s well above the average sales price in your market.
12. Deciding to sell a house for the amount the seller paid for it
Maybe you bought the home in 2007 or 2008 and you’re insistent that you want to get exactly what you paid for it out of the deal -- at least.
That might be wishful thinking; many areas of the United States are still trying to reach pre-recession price levels, and depending on when you bought, it might make sense to wait a little bit longer (or adjust your expectations) before you sell. Although Colorado is one of the stronger markets in the country, some neighborhoods may still be suffering from value challenges.
13. Pricing based on how much a friend or neighbor got for their home
Real estate isn’t like any other asset -- not only is it the largest asset most people will own in their lifetimes, but unlike cars or jewelry or clothes, every home is unique, if only because of its location.
So maybe your friend or neighbor has a slightly better view than yours, or maybe their home was newer -- or any number of factors that will affect price. Even if they were built by the same contractor in the same development, there are plenty of reasons why a buyer might pay more for one than another.
14. Setting a price based on listed homes, not sold homes
Here’s an obvious fact that some people seem to miss: Homes for sale haven’t yet sold.
So if you’re looking at other homes for sale in your neighborhood, noticing how big they are and when they were built, and trying to establish a similar sales price for your own property, you might be following those sellers down one of their own mistake-strewn garden paths without realizing it. It’s better to look at homes that have sold and go from there.
15. Failing to research home sale prices at all
That said, you should at least glance around to see what’s going on in your neighborhood before you decide to set a sales price for your home. You can’t always place too much stock in listing prices and sold home prices -- but ignoring them entirely will get you precisely nowhere.
[caption id="attachment_981" align="alignright" width="300"] Photo by Tyler Mullins on Unsplash[/caption]
16. Refusing to negotiate
Every real estate agent has a story about a seller client who refused to consider a reasonable, perfectly acceptable offer -- and ended up having to settle for something much worse later on when no “better offers” emerged.
That saying “a bird in the hand is worth two in the bush” applies to buyers, too.
17. Hiring a listing agent based on sales price alone
When you sit down to interview an agent to help with your home sale, don’t make the mistake of fixating on the one big number that agent gives you -- the price. Ask them questions about how they plan to market your home, what they’ll do to find buyers and what they think needs to be done to get it ready for sale -- and ask them about sales price, of course, too -- and consider all of those factors before making your decision.
If you list with an agent who promises you the moon because they gave you a dazzling price, and you neglected to ask how they’d find buyers willing to pay that price, then don’t be surprised when those buyers don’t materialize. (And be very suspicious of any agent who mentions “special buyers” of any kind that only they can procure.)
18. Falling in love with an AVM
Maybe it’s not a real estate agent’s sales price number that’s caught your eye -- maybe it’s one you found on Zillow or a brokerage website.
Those valuation models can work well in very homogenous areas, but that’s certainly not everywhere -- and they also don’t necessarily know the details about your home. If you’ve added a bedroom or bathroom, or divided your lot, or filled in your swimming pool, or made any other changes to your property, that number will get increasingly less accurate. A valuation or appraisal from a professional is a much less risky number to bank on.
19. Leaving out potential buyers in online searches
Depending on where you are in the market, it might make sense to price your home at a number ending in “0” instead of “9.”
For example, if your agent says your home is probably worth between $390,000 and $410,000, then $400,000 is probably your sweet spot as opposed to $399,999. Even though the price ending in “9” might appeal to buyers’ affordability psychology, most real estate search platforms give buyers the option to search for prices in increments of 10. That means that anyone looking for homes between $300,000 and $400,000 will see your $399,999-priced listing -- but your buyers looking for homes between $400,000 and $500,000 (who are arguably more qualified to buy) will not.
Pricing a home correctly involves market savvy, understanding a home’s features and the ability to pinpoint what buyers in a given neighborhood are willing (and able) to pay. Sellers that can manage that while avoiding these 19 mistakes should be signing paperwork at the closing table in no time!