Real Estate Pricing Mistakes that Seller’s Need to Avoid
Selling a home can be difficult, but it does not have to be impossible. In fact, it can be relatively “easy” if common mistakes are avoided. The mistake that is made most by sellers relates to the pricing of their homes. The pricing of a home normally determines whether a home will be sold relatively quickly or if it will linger on the market for a long period of time.
If a home is overpriced, it doesn’t matter if a seller hires the best real estate agent in their local market who also has the best marketing plan, it will not sell! Pricing does the majority of the marketing of a home, between 80-90%.
Listing a home at the correct price will almost guarantee that a buyer will be writing an offer in a quick amount of time (often just a few hours or days after being listed). Unfortunately, pricing a home at the correct price is not a simple process. If it was as simple as listing a home for it’s assessed value, there would be no need for real estate agents. If it was as simple as listing a home for what Zillow’s “Zestimates” say a home is worth, there would be no need for real estate agents.
There are real estate pricing mistakes that seller’s need to avoid because overpricing a home creates a damaging effect! Here are four mistakes that are more common than others when it relates to pricing a home for sale!
Pricing the Home High to Leave Room to Negotiate
Many sellers believe that it is a common practice of a buyer to offer lower than the house is listed for. In most cases, this is the farthest from the truth.
A seller who lists their home for $10,000 more than a real estate agent recommends because they believe this will leave them with $10,000 in negotiating room is making a huge mistake. Today home buyers are extremely knowledgeable and savvy. The internet has made it extremely easy for consumers (in general) to obtain information. If a home is overpriced, buyers will not look at it. So, the home owner who prices their home higher to leave room to negotiate won’t have anything to negotiate because potential buyers won’t waste their time looking at a home they know is overpriced!
If a home is priced correctly, the buyer’s real estate agent should be providing their client with information so they can make an educated decision on what to offer a seller. It is still possible in this situation that a buyer will make an offer that is much less than what a home is listed for, however not as common. Listing a home for market value and not listing it to leave room for negotiating, will more times than not, get a seller more money in a shorter amount of time!
Pricing the Home with the Real Estate Agent who Offers the Highest List Price
In most local real estate markets, there are anywhere from several hundred real estate agents to several thousand real estate agents. For example, the number of real estate agents in the Greater Rochester NY area is nearly 3,000. Like any industry, there are professionals who are great at what they do, professionals who are average at what they do, and professionals who are terrible at what they do.
In every local real estate market there are agents who “buy listings.” An agent who “buys a listing” will tell a seller their home is worth an unrealistic amount of money, just to obtain the listing. This is doing a huge disservice to any seller and the agent! A seller who interviews (interviewing is an important tip to help ensure the “right” real estate agent is selected to sell a home) three agents and selects an agent solely because the agent said their home was worth $50,000 more than the other two agents did, and doesn’t have facts to back it up, is making a huge pricing mistake!
Real estate agents are in the business to sell houses and offering a list price that is unrealistic is not going to accomplish this, thus wasting their prospective sellers time as well as their own!
Pricing the Home without Having A Professional Real Estate Agent Perform a Comparative Market Analysis
As mentioned above, pricing real estate is not a simple process. There are many things that a real estate agent takes into account when pricing a home.
A great real estate agent will spend hours researching and “massaging” data prior to determining what they’d suggest a seller lists their home for. A top real estate agent will complete a comparative market analysis, also known as a CMA. There are many sellers who don’t know what a comparative market analysis is, most of the time this is because their real estate agent neglected to perform one, neglected to review their CMA with their client, or their agent never even offered to explain exactly what a CMA is and what is involved with it!
A seller who does not have a comparative market analysis performed on their home is making a huge mistake as is the Realtor. If a CMA is completed correctly, a home should sell relatively close to the list price and in a relatively short amount of time. If a comparative market analysis is not completed on a home, there is also the possibility that there could be problems with the home under appraising. The purpose of a market analysis is not only to determine a realistic listing price and a probable sale price of a home but also to reduce the chance the home under appraises!
Pricing the Home High because the Seller has Timei
It is not uncommon for a seller to say, “We are in no hurry to sell, so we want to list our home for $200,000, even though you suggest and your market analysis shows that the market value is approximately $175,000.” While a difficult thing to do, a great real estate agent will “walk-away” from this listing. Being in no hurry to sell, does not mean overpricing a home is a good idea. If a seller is not in a hurry, the best option will be to wait until the seller is in a position to price their home correctly!
Pricing a home high because the seller has time means the house will sit on the market. Homes that sit on the market for an extended period of time begin to develop a “stigma.” Buyers begin to ask questions, such as, “what is wrong with the home?” It’s very possible that there is absolutely nothing wrong with the home, other than the seller is asking an unrealistic price!
Bottom line, price it right, it will sell! Pricing mistakes in real estate can be avoided, if sellers are aware what they are and what effects they can have on selling a home! If a home is priced correctly, there should be several showings within the first couple days on the market and also an offer in hand within the first couple weeks! If there isn’t, there is a reason the home is not selling, normally the price is too high!