One the biggest headaches that a Realtor has to deal with is the unrealistic expectations of a home seller. Most people believe their home is worth more than its true value. The real estate market is filled with properties that will never sell unless they come to grips with reality. A few of the reasons people overprice their property include lack of comparable home sales, poor Realtor representation, too emotionally attached to the home, believing improvements are worth more than they really are, ignoring competing homes for sale, valuing their home based on what they paid plus an expected appreciation rate and ignoring the current real estate market conditions.
What is market value? International Valuation Standards defines market value as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.”
Market value is not:
* It is not the price you paid for the home plus improvements and real estate commissions.
* It is not how much your friend, in-laws, attorney, accountant, sister with a real estate license, neighbor or anyone else thinks your house is worth unless they are willing to buy it at that price and you are willing to sell it at that price.
* It is not what you paid for the home plus an expected rate of return.
* It isn’t more than what your neighbor’s house sold for because you like your house better.
Here are 10 tips to pricing your home properly:
1. You need to be objective – Buyers primarily value a home based on location, quality, size and condition. They don’t really care that you grew up in the home and all of the great memories you have there. Don’t factor those things into your price.
2. Forget about the past – Yes, all of our homes used to be worth more a few years ago. “We could have sold it for xxx,xxx a few years back” is said pretty often. The real estate market changes daily. If you want to sell today them sell at today’s prices.
3. Don’t expect a sucker – This happens occasionally but you certainly cannot rely on it. If you truly want to sell your home expect to sell it for market or appraised value.
4. What will your home be worth in the future? – This is a very important question since we are in a down trending market. I have seen so many people reject offers on their home only to accept much lower offers later because the value of their property declined. I had a home listed for $1,200,000. We received an offer for $1,000,000 which I thought was market value and explained that to the seller. She rejected the offer and the buyers walked away. Roughly a year later she accepted an offer of $825,000. If you think home prices are going to fall further, price your home competitively from day one.
5. Analyze the market thoroughly – This is where a good Realtor can come in handy. I’ve worked along side some agents who put about five minutes worth of work into arriving at an asking price. In some cases that may work but most of the time it doesn’t. Look at the properties currently on the market, under contract, recently sold and expired. Many people forget to look at the expired listings. These are good to analyze to see what went wrong so you don’t make the same mistakes. How does your home compare with the recently sold properties? Again, make sure you are being objective.
6. Advertising does not justify overpricing – Marketing a home is important however many people believe that if they see their home in the newspaper more often that they can justify overpricing their home. A buyer may come to your home based on your agents advertisement but they will still see other similar homes for sale. If your home is overpriced and they can get a better deal in another home then your agents advertisement just helped sell one of your competitors.
7. Don’t forget about an appraisal – Selling your home can be a hassle. You don’t want to go through the whole process only to find out that your home did not appraise out. If possible, find three similar homes that recently sold. Establish your asking price with those sales in mind. That is what an appraiser will do. Lenders are scrutinizing the appraisals so make sure yours is based in reality.
8. Get in front of the market – when prices are falling many sellers make the mistake of chasing the market lower. They establish their asking price at say $500,000 when it is really worth $450,000. After a year their home has dropped to $400,000 so the seller drops their price to $450,000. This is an example of chasing the market lower. Had the seller priced their home properly from day one they would have put more money in their pocket.
9. Be the best value – Home selling is not brain surgery. People buy the best deal. Examine your competition and be the best deal. It is almost that simple.
10. Lower your price – You need to be flexible. Since the market changes daily you may need to change with it. Be the best deal out there and wait patiently. If a better deal comes on the market then you may have to lower your price to stay competitive.
Buyers are driving this market right now. If you are thinking about selling your home in a bad real estate market keep these tips in mind when establishing your asking price. You can have all of the marketing in the world but if you are asking too much for your home it most likely won’t sell.
Marc Rasmussen is a Realtor who sells Sarasota FL Homes For Sale
