Here’s a riddle: What do homebuyers care about more than “location, location, location” in finding the house of their dreams?
Layout? No. Amenities? No. Luxury upgrades? Sorry.
The answer is…
Unwrap your mind from that pretzel and bear with us: The first thing buyers look at in their home search is the price. No matter how perfect the house, it’s a big “NO” if the price doesn’t line up with a buyer’s budget.
Miss the bar by a thousand dollars, and you could lose out on an entire pool of potential buyers. In August the national share of home price cuts hit 19.1% (compare that to 13.1% in 2012), meaning more sellers aren’t pricing aggressively enough from the start.
Real estate agents deal with this every day. Homeowners fantasize an ideal list price for their home even though it doesn’t align with the current real estate market.
We’re here to give you the dose of reality you need: Just like the “location, location, location,” cliche, these are the biggest myths you need to block out when pricing your home to sell fast and for more, according to the top real estate agents in the business.
Home Pricing Myth #1: Price your home higher to make more money.
One of the biggest mistakes you can make is to overprice your home. A higher list price will not translate to more money in your lap.
In fact, the National Association of Realtors’ reported in 2017 that sellers typically sold their homes for 99% of the listing price while 22% reduced the asking price at least once.
Listing your home above market value could cause it to sit on the market longer and make buyers wonder why it hasn’t sold.
Buyers these days are smart—they see comparable homes in your area online every day, they gather their own data, and they know how long a house has been on the market. Plus, the imminent home appraisal will reveal the true value.
In order to sell your home for the most money possible, you need to price it right. Gladys Blum, a Salem, Oregon real estate agent who’s sold over 67% more properties in Salem than the average agent, says that even a few thousand dollars over your target price could steer buyers away from your listing.
“If we’re at $259,000, I’m going to say, ‘We should price it below $250,000 because buyers search for homes in $25,000 increments online,” says Blum. “If you’re aiming for a buyer who will pay $250,000 you need to price it in that category.”
Myth #2: If you think your home is worth more, ignore the comps.
Everyone’s home is special to them, so everyone thinks their house is worth more than their neighbors’. When it comes down to it, buyers and their real estate agents compare house prices based on the facts.
Comparable homes have the same number of bedrooms and bathrooms, approximate square footage, and age as other homes in the area that were sold within the past 3-6 months. If your neighbor’s house is identical to yours and they sold it 3 months ago, stay close to their list price when pricing your home to sell.
Your real estate agent will tell you if your home can be priced higher than the comps in your area. Typically, you can get away with pricing your home higher than the comps when it has one or more of the following things:
- More bedrooms or bathrooms
- Added features such as an attached garage, a finished basement, or master suite
- Larger lot size
- Low market competition
“If there are 5 or 6 homes on the market, I’m going to say, ‘Hey, if you want to sell, what’s more important: time or money?” says Blum. “If you want to sell it in 60 days, we need to be below your competition.”
Myth #3: The internet says your house is worth “X”, so that’s the price you can list it for.
With all of the home value estimators online nowadays, it’s quick and easy to get various estimations of what your home is worth with the click of a button. However, when you try to figure out how much your house will sell for, the internet can be a useful starting point but should not be your end game.
Automated valuation models, or AVMs, gather data to guess the value of a property based on location and other measurable factors.
When you decide to sell your house, it’s harmless to compare online home value estimators with a trusted tool such as HomeLight’s Home Value Estimator. But, don’t get too excited. This value is a general ballpark amount that your house may or may not be worth based on the limited data available.
Worst case scenario, the estimate sets your expectations too high from the beginning, making it difficult for you to mentally reconcile with a lower price point.
Real estate agents will factor in hundreds of minor details that aren’t always measured by AVMs, like a home’s proximity to a big power line, noise levels, positioning on a steep hill, or general buyer sentiment in the area.
The best way to find out how much your house is worth is to meet with a top real estate agent. An experienced real estate agent with knowledge of the area can conduct a comparative market analysis (CMA) to tell you the actual value of your home.
Myth #4: Include the cost of renovations or updates you’ve made in your home’s list price, dollar for dollar.
It may come as a surprise, but not all home renovations have a positive ROI. In fact, Remodeling Magazine reported that the average payback for 20 common professional remodeling projects in 100 major U.S. markets was only 56.8% in 2017.
Take HGTV’s Christina El Moussa. She and her ex-husband, Tarek, purchased their Yorba Linda, CA home for 2 million dollars in 2013. In mid-2018, the house was listed for just under 3 million dollars.
Now the kicker is: the Flip or Flop duo poured over 1.5 million dollars into renovations and remodels over the years. So hypothetically, in order to earn that money back, they would’ve had to list the home for significantly over 3.5 million dollars. Instead, they knew their house wouldn’t sell for that much based on the selling prices of similar homes in the area, so they listed it appropriately. Guess what! It sold in less than 3 weeks.
Remodeling projects are tricky––the wrong project in the wrong market could cost more time and money than it’s worth. Before you take on any projects, talk to a real estate agent to find out which projects will recoup the cost in the sale price.
If you factor every dollar you’ve ever spent on your home into your list price, you’ll lose even more time and money when your overpriced home sits on the market.
Myth #5. Price reductions always give your listing a bad rap.
Contrary to popular belief, price reductions aren’t all bad. Blum says she’ll sometimes reduce a list price by $1,000-$2,000 just to get buyer attention.
“If there’s a price change of any kind, whatever buyer has looked at that property online is going to be notified,” she says. “If they looked at it or liked it at all, they’ll be reminded of the home.”
Trust your agent on whether this is a good idea for your individual circumstance. Top-notch real estate professionals are also savvy marketers, so they’ll know when to pull out certain tricks in the book to drum up buzz.
Myth #6: If you accept the first offer that comes your way, you priced your house too low.
Fast offers aren’t a bad sign––especially if the first offer you receive is full price. If a buyer really wants a home, they’ll make a competitive offer right off the bat to stand out against other buyers.
Don’t hesitate to accept the first offer. It could be the best one you get. Plus, full price offers are a sign that you priced your house right.
Myth #7: Be patient, there’s no harm in waiting around for the right offer.
When your house is on the market, it’s easy to think, This offer is too low or This buyer isn’t perfect. The reality is: if you wait around for a generous offer from a perfect buyer, your house will never sell. When a house sits on the market, it becomes stale and obsolete.
Once you receive an offer or (hopefully) offers, sit down with your real estate agent to figure out your next move. If an offer is lower than what you’re comfortable with, counter back with something higher. Negotiations are a part of the game and a top real estate agent can help turn a subpar offer into a deal everyone’s happy with.
Here are some tips to make a reasonable counteroffer:
- Separate your wants from your needs. Don’t expect a buyer to agree to every single term. Put your vital needs first to show the buyer what you aren’t willing to compromise on.
- Take another look at the comparable homes in your neighborhood. If you receive a lowball offer and the comps are significantly higher, you have reasonable justification to counter back.
- Listen to the advice of a real estate agent. Your real estate agent is there to help you through tough negotiations. They can tell you how much your home is worth, when to counter back, and when to walk away.
Don’t listen to myths about pricing your home to sell
Using a top real estate agent’s comparative market analysis, you can price your home to sell fast and for more money.
Remember these 3 things when pricing your home to sell based on an evaluation of the comps:
- Stay within the price range of the comparable homes in your area.
- Factor in the cost of renovations only if they add value to your home.
- Don’t base your list price on online home value estimates.
Find the perfect list price for your home by working with a real estate agent who’s an expert in your area.