Every home owner wants to realize as much money as possible when selling. But a listing price that is too high often gets the seller less than a price that is at market value. If your house is not priced competitively, people looking in your price range will reject your house in favor of other, larger homes for the same price. At the same time, the people who should be looking at your house will not see it because it is priced over their heads! Realtors® do searches for buyers up to a maximum price range. Overpricing usually increases time on the market, and that adds to the carrying costs. Ultimately, many overpriced properties sell below market value.
Comparative Market Analysis (CMA): The probability of receiving an acceptable offer on your property and completing a sale diminishes significantly when your asking price is higher than the current market value. To keep your asking price within the current market value range, analyze all the factors that affect your property's value in today's real estate market. The factors include:
- Your property - its strongest selling points: Location, Condition of property, Size of home, Size of home site
- Buyer demand
- Seller motivation
- Financing availability and interest rates
- The comparables - recent closed home prices of comparable homes in your neighborhood
- The competition - the asking prices of other homes for sale in your area
- The expired listings - homes offered for sale that did not sell
The asking price of your property should be based on the information the market provides and your comfort level. After searching all factors involved, establish competitive price range and seek a price level that will spark buyer activity. With this information, you can make an informed decision about your asking price.
Bull or Bear Market?
The basic laws of supply and demand apply to the real estate market and directly influence a seller's ability to stand firm on their asking price. In a seller's market or a "bull" housing market, where prices are rising, sellers can be very selective due to the large demand and little supply of homes. There will likely come a time when things plateau and housing prices fall. When this occurs, sellers will be selling into a buyer's or "bear" market and sellers will become more flexible about accepting offers. It is important to know what similar homes in your neighborhood have sold for per square foot and make a comparison. Be aware and educated on the competition for comparable properties. If an offer comes in close to what you want, realize that in a bear, downward or buyer's market, the next offer may be thousands of dollars lower.
"Showcase" the Home
Buyers look for homes, not houses, and they buy the home that they can picture themselves living in. Owners who fail to create an inviting atmosphere, chase buyers away as rapidly as agents can bring them. You can greatly increase the appeal of your home by making necessary repairs, sprucing up the house inside and out, touching up the paint and landscaping, and keeping it clean and neat. If you were selling a car, you would wash it, or maybe even detail it to get the highest price. Houses are no different except there worth much more so dress it up!
Make a Plan and Stick with it
Selling a home is just like starting a business. Sellers need a selling plan detailing what terms and net price (after real estate commission) would be acceptable. Don't be confused by a fast talking real estate agent who attempts to convince you that their client's offer is good unless it meets the original terms in your plan. Also, don't let a real estate agent convince you to pay 3% towards the buyer's closing costs on an offer that is thousands less than your asking price. Be patient in a seller's market and be a fast draw in a buyer's market.
Use a "Soft Sell" During Showings
Buying a house is an emotional decision. People like to "try on" a house and see if it is comfortable for them. It's difficult for them to do that if you follow them around pointing out every improvement that you made. Be available for questions, but resist the temptation to talk the entire time a buyer is there. Let them discover things on their own. Try a tasteful sign to point out some hidden amenity that they might miss.
Mistaking Window Shoppers for Buyers
For Sale by Owners always get more activity than houses listed with an agent. However, a great deal of this activity can be composed of "window shoppers," or people who are merely testing the real estate waters. Realtors® will only bring qualified buyers, and these will be fewer than if you open your front door to every one who walks down the street.
A qualified buyer is one who is ready, willing, and able to buy your house. We find that most people who go looking at For Sale by Owners are just starting to think about moving. They may be good buyers, but they might be just 6-9 months away from being ready. They don't want to bother an agent yet, so they call the "By Owner" ads to get a feel for what's available. They may have a house to sell first, or may need to save some more, or may have credit that needs fixing. When everything is in place, that's when they go out looking with a Realtor®.
A real estate agent will ask a buyer questions which are designed to qualify and prescreen. These questions cover areas like: (1) How much can the buyer spend for a house; (2) How much liquid cash is available for a down payment; (3) Credit questions and maximum monthly payments; (4) How much equity in the present home?; (5) Have they been pre-approved and for how much? There are many more qualifying questions that need to be asked to avoid wasting their time.
A Realtor® finds out all the facts before the buyer crosses your threshold. Otherwise, you may have a parade of Sunday afternoon shoppers with a dream of owning a home someday. That's a good reason to have your home listed in the MLS so Realtors® are working for you.
Not Knowing Your Rights & Obligations
Real estate law is extensive and complex; the contract for sale and purchase is a legally binding document. An improperly written contract can cause the sale to fall through, or cost you thousands for repairs, inspections, and remedies for title defects. If there are defects in your title, or if your property is in conflict with local restrictions, you must remedy them. Employing our expert brokers through the StreetSmart PRO program will ensure the execution of a solid contract.
Signing a Listing Contract with No Way Out
Many times a real estate agent will have good intentions about marketing your house, but circumstances can change. There might be a death in the agent's family, or the agent may decide to quit the business. In these cases where the agent couldn't or wouldn't perform, you should have the right to fire your agent. In some companies the broker will assign your listing to someone else in the office, someone new in the business that you didn't personally select. Always protect yourself by getting a guarantee of performance with the right to cancel.
Limiting the Marketing and Exposure of the Property
The two most obvious marketing tools (open houses and classified ads) are only moderately effective. Surprisingly, less than 1% of homes are sold at an open house. Agents use them to attract future prospects, not to sell the house!
Advertising studies show that less than 3% of people purchased their home because they called on an ad. And if a machine answers, most callers just hang up without leaving a message.
The right agent will employ a broad spectrum of marketing activities, emphasizing the ones that they believe will work best for you. There are dozens of more effective ways to find buyers than just open houses and advertising. Most calls from prospective buyers come in during business hours when sellers are away at work, and most home showings are between 9:00 and 5:00 Monday through Friday.
Believing that a Re-fi Appraisal is the Market Value of Your Home
An appraisal is an opinion of value for a certain purpose. If the lender wants to lend you the money, they are motivated to have the appraisal come in high. Or, if a borrower needs $50,000 out of their home, the appraisal will likely come in close the needed number for the lender. Don't make the mistake of thinking that the appraised value has a lot to do with resale value or what a real buyer would pay. Ask your Realtor® for ALL the CLOSED SALES in your area, and then decide on the value. The courthouse will have records of recently recorded deeds. An effective way to do a comparative analysis is to take the most recently closed sales in your neighborhood and look at the cost per square foot of living area. Price / living area = cost per sq. ft.