When homeowners are preparing to put their properties on the market, MONEY is often at the forefront of their minds. And everyone has an idea of what their home is worth. Setting a list price accurately could mean the difference between getting an offer quickly, or having your home sit on the market for months with little interest. There are plenty of myths surrounding the science behind pricing strategy, and here we will debunk these myths so you can move forward and allow your Realtor to suggest a list price accurately.
1. "If we keep waiting, a better offer will come along"
When sellers receive an offer within the first couple days of their home being on the market, they may be skeptical or hesitant to accept it, wondering if other buyers may be willing to pay more. The bidding wars of yester-year had allowed people to think there are tons of buyers out there willing to fight over their property. But there is no guarantee of other buyers waiting around the corner, or how long it will take another offer to come in.
Let's tell a story about my very own father: When I was a about 18 still living at home, my father listed our home for sale. We received an offer after a couple of weeks, but it was a little lower than my dad was hoping to get, so he rejected the offer and waited for the next to come in...The house sat on the market for 3 months! Price reductions, various showings but no bites. My dad was getting desparate. Finally... after months on the market another offer finally came in.... even lower than the first! But my dad needed the house gone so he could downsize, so he had no choice but to work with the buyers, and settle for a sale price lower than he wanted, and lower than that first offer. Moral of the story? If the offer is decent, try working with the buyers. Negotiate, and come to a common ground on price.
2. "Getting an offer right away means the agent priced it too low"
When sellers receive an offer early in the process, as excited as they might be, many can't help but wonder "should we have asked for more money? Did our agent price it too cheaply?" While it's natural to be skeptical (maybe even a little greedy), receiving an offer early in the process most likely means your home was priced perfectly, and attractively. If you trust your agent, you know he/she didn't pick a random number, but rather they selected that price point after extensive research of the market and other homes that have recently sold comparable to yours. Be glad your sale is moving quickly. Allowing multiple groups of people through your home, keeping your home perfect, and always leaving for showings can grow tiring if it drags on too long.
3. "We should price it so there's room to negotiate"
Let's be honest, most sellers would love top dollar for their homes. But overpricing it with the intention of being able to accept lower may just leave you empty handed in the long run. Plus, if you don't get any bites off your initial higher asking price, and have to go through multiple reductions - Buyers can become weary thinking there's something wrong with the place.
4. "We can add all renovation costs to the asking price!"
Sellers may love the renovations they've made, and want to add those costs into the listing price. But remember, not every change is going to add a huge return on investment. Kitchens, bathrooms and flooring are the biggest ROI but make smart choices. If you're re-modelling specifically to list your home, choose cost effective choices (without being too cheap and poor quality) that will add the highest value to your home.
5. "My Realtor overpriced my house to make a larger commission"
Agents are paid a percentage of the selling price of the home, however, even a $25,000 increase doesn't necessarily mean much more money for them in the end. For example: An extra 25,000 would equal an extra $1,500 paid out in commission, which then gets divided between bother the Buyers Agent Side and the Listing Agent Side, and your agent would likely only end up with less than $750 extra in their pocket. It's hard to imagine an agent would blow a quick potential quick sale over a few hundred dollars.
6. "Reducing the price is a sign of weakness"
While no homeowner is eager to lower their listing price, if time is passing and there's been little interest it's time to consider lowering. Remember, time is money. While you're waiting for someone to match your ideal price you're still paying mortgage, utilities, taxes and more! Plus, sometimes lowering your price can put your home in a new bracket and gain exposure from a whole new group of potential buyers, and you could end up suddenly gaining lots of interest and maybe a pending quick sale.