MYTHS AND URBAN LEGENDS FOR HOME SELLERS
Often, the most important advice a real estate listing agent can give sellers is how to price their home.
No matter how beautiful or well-maintained a property may be, how many upgrades it has or how well it shows, what the neighbor's home sold for or how much the prices have gone up, if a home is not properly priced, it’s going sit on the market and be a tough sell. In fact, pricing too high out of the gate can cost the Seller down the line.
The battle often lies with aligning what sellers’ think their home is worth with its true market value which might be quite different not matter what any websites say.
Here's seven pricing myths that often get in the way for listings.
1. It is better to price the home on the high side because the seller can always come down.The corollary here is that sellers mistakenly think if buyers are interested, they can make an offer. But that's not how buyer behavior is working today. With the current generation of buyers and particularly millennials, if a home is overpriced, the buyers will wait for a price reduction. (The same comment applies for presentation, condition and other factors all of which must be congruent in order to get the desired effect.)
The asking price sets the stage and may invite or dissuade buyers. Just as you would painstakingly prepare your home for sale, you never get a second chance to make a first impression price-wise.
That's why you see comparable Redondo Beach properties selling for $20-50K price differentials.
2. If a home is priced too low, a seller risks leaving money on the table.
Actually, the opposite is true. A home priced to sell tends to generate a lot of interest and can result in multiple offers and a final selling price over the MLS list price because a shorter marketing span brings in stronger more serious offers.
In multiple offer situations, buyers are less likely to play “let’s make a deal” and nit-pick every little thing because they feel the urgency of competing with other interested parties for the same house.
3. If it doesn’t sell, the seller will get a better price by re-listing next spring, next summer, etc.
That's a nice theory and it may have worked for some but it is not a given that waiting will get you more. If prices increase expect to see more competitive listings. If interest rates go up, expect to see fewer buyers. Right now the selling environment is very favorable for sellers. It is not a given that continues indefinitely into the future.
The longer a home stays on the market, the more likely buyers are to question its value because they want to know why no one else bought it.
Subsequently, any offers that come in tend to be perceived as too low by an already-frustrated seller who thinks there weren’t any buyers for their home while it was on the market the first time.
Granted, some seasons can be better than others — and that really depends on where a home is geographically located.
Ultimately, waiting to re-list again may mean competing with other houses on the market that are both nicer and offer more bang for their buck.
The additional carrying costs of a mortgage, maintenance and upkeep as well as the possibility of needing to make repairs to an aging roof or AC system eat into the profitability of commanding a better price next year.
If the home is somewhat dated on the inside, price out the cost of replacing granite counters, updating appliances, repainting and other upgrades, and it will likely be much less expensive to adjust the price without as much hassle.
4. The price is as low as the seller will go.
When faced with an offer that is less than what they want, sellers love to draw a line in the sand and dig their heels in over an arbitrary number that they deem to be “their bottom line.”
Who decides what a property is ultimately worth anyway? Buyers see the glass as half empty versus half full, and in some markets and real estate cycles, they are holding the cards.
Sellers can decline an offer based on a number, but they may never get there with another buyer, and a subsequent offer may be lower or layered with conditions and complications.
5. An offer should come in close to asking price.
Sellers are often disappointed at the initial price when an offer is received and ask “why so low?”
Unless it is a really hot property, priced aggressively or in a low-inventory market, no buyer is going to willingly offer more than they have to, especially on a first pass. They want to get a sense of the seller’s flexibility or lack thereof before deciding their next move.
Does a seller really think a buyer is going to be generous with their initial offer? I've had more than a few situations where the lowest initial offer in a multiple offer situation turned out to be the best buyer.
6. Outdated features don't impact the selling price.
So the home has “upgrades” circa 1990 with white melamine cabinets, beveled edge laminate counters and builder grade 12-by-12-inch tile with brass fixtures, and the seller expects the buyer to pay full asking price or close to it? Not really.
The buyers are looking at how much they are going to have to spend to bring the home up to today’s standards and are going to deduct accordingly when formulating an offer.
7. The buyer’s offer is simply too far off the asking price to counter.
It can be easy to get offended, but it’s best to keep emotion out of negotiation as much as possible and work in good faith with what’s presented. A buyer has stepped up and put pen to the paper with a proposal (or finger to DocuSign). An offer is an invitation to negotiate and begin discussions about the property.
I often advise my sellers to look at everything but price which is usually met with some pushback. If a buyer is not qualified and won't agree to standard terms then the price doesn't matter because the deal won't close. If the only issue is price, let's make it work!
Take a look at my listings in the postcard above. Priced and presented right, they sold over the list price. Quickly. With multiple offers.