When you overprice your home the terrorists win!

When you overprice your home, the terrorists win!

Alright, cheap shot, I know! I thought, in this post, that I would address some common myths relating to the touchy subject of valuing and pricing a home.

Generally, there are three critical components to getting an offer on your home: condition and location, marketing and price (alright, technically that’s four but we’re lumping condition and location into one category. Actually, we could lump marketing and price into one so maybe it’s only 2 categories????????). Anyway, once you have the offer, then negotiating and knowledge of how to get it closed come into play. For brevity’s sake, this post is just going to be about a few of the time honored misconceptions related to pricing a home. I’ll take up more specific points of how to price in a later post (did she say brevity???????? – really? We’re not off to a good start!).

In most markets, including our current one, price will be the biggest factor in selling a house (yes, even bigger than enticing that would-be-buyer with a gold bidet and matching towel racks). Perhaps it is the fault of the internet that people can now see “zestimates” on sites such as Zillow and others that look to inform would be buyers of the value of homes. Perhaps it is hard earned wisdom from the last 4 years of our painful real estate slide. Whatever the reason, we have a more informed, generally more cautious buying public.

Given that you can’t change the location of your home and basic floor plan (to date, they do not make PODs big enough to fit your whole house), that usually leaves price, aside from some general spiffing up (technical term for let’s get rid of the orange shag carpet and the blue linoleum floors)

You do, however, have control over presenting your home in the best possible light, making sure it is aggressively marketed and pricing it within the segment of the market that will bring you the most buyers. Below is a little graphic of home pricing compared to the number of potential buyers that will see your home.

market share based on pricing

Now, I realize that you may just have installed a new mosquito misting system, reverse whole house osmosis filter, laid new sod, or planted a new gnome in the front garden. These may or may not add value to your home. Keep in mind that there is value that is an “appeal” or a “nice thing to have” for a potential buyer and then there are things that will actually add monetary “value” in the eyes of the appraiser (that mean man or woman who will determine what the bank will lend on your home – {actually if there are any appraisers reading this – I don’t really mean MEAN – I mean EVIL, yes, in the biblical sense of the word!})

Over the years I’ve heard quite a few statements such as, “but I just replaced the roof, and my air conditioner is only 2 years old. That should add to the value.” Well, those things are definitely a plus, but generally most people expect the roof not to leak, and the air conditioner to work. Fixing those things that should have been maintained is typically considered “deferred maintenance,” and does not add to the value. Not, having those thing done unfortunately could detract from the value.

The logic on this is sort of a one way street – like those big metal spikes they have at the exit to the car rental places, you can move forward to replace the expensive things such as the roof and the AC, and they will most likely be taken for granted, but if you don’t replace them (back up over the spikes) the deal could “go flat” on inspection, plus they are likely to offer less if they suspect they will need to lay out money for a new roof.
Not saying it’s fair…..

A common thought process by some sellers is; “I think we should price it $50K over the market and let them bargain us down.” There is some logic to this but, if your home is a $50K home to begin with, this probably will not work. You have to be within a range that will seem approachable to begin with. Sellers who are too high are considered “unreasonable” by many buyers and their homes are not even viewed (which is typically the first critical step to getting an offer) or, they are given low-ball offers due to the “unreasonable” factor.

I have seen homes that were priced right sometimes get more than the asking price as they attracted more offers and created a sort of “auction” atmosphere – not a bad thing! And remember, as a seller, you always have veto power. So, take that you terrorists!

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