Whether you're getting your first home loan or are re-entering the housing market after a long time, choosing a mortgage product is definitely a tricky affair. There are many factors to consider
Jun 7 2016 20732 5
Dated: June 7 2016
We know, we know—you love your house. The kitchen is the perfect size, your weekly summer barbecues give your neighbors patio envy, and your ’70s-style conversation pit is totally coming back into vogue—as you knew it would.
You’ve seen the comps for your neighborhood, but you just know your home is worth more, so you’re going to list it at a higher price.
This is one of a few reasons why sellers overprice their home, and none of them is smart. If you price your home too high, it’ll take longer to sell, raising doubts in buyers’ minds about whether there’s something wrong with it, and you’ll probably have to drop the price eventually anyway. So don’t fall for any of these five common justifications sellers use to inflate the price of their beloved property.
1. You have the Midas touch in decor (you think)
The reason that interiors are often painted white or neutral colors before a sale is that that allows potential buyers to envision what colors would make it their home. Your quirky or colorful touches might not be for everyone, and can actually devalue your house.
Alexandra Axsen, owner and managing broker of Lake Okanagan Realty in British Columbia, Canada, listed a home whose bathrooms were all sorts of strange colors—olive-green toilets, a purple bathtub, and a pink sink. When Axsen recommended to the seller a price that factored in the cost of necessary updates, things got a little heated.
“He got very upset and argued with me that his colorful fixtures added value, because people are tired of the all-white, stale hospital look,” Axsen explains.
So they tried the seller’s way first, listing it for his desired price. It didn’t sell, and buyers gave feedback that the home was overpriced. After weeks on the market, the seller finally agreed to lower the price. It sold within a month.
2. You’re nitpicking comps
Comps (or comparable market analysis) are valuable reference points that allow you to compare your home to similar nearby homes in order to price it right. But some sellers place too much value on ultimately negligible differences between their home and the comps.
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Bruce Ailion, a real estate agent in Atlanta, lists a few he’s heard: “My home has a 60-gallon hot water heater; every other home has 40. My deck is 60 feet larger. My den has real barn wood paneling.”
Small features like this might be worth pointing out to potential buyers, but they’re not going to make or break a deal—and trying to price your home based on the size of your deck is a setup for disappointment. Plus, you might not see the flaws in your home—your deck might be big, but it might also need work.
“By nature, we see life through rose-colored glasses,” Ailion says. “Sadly, it can cost us significantly when it comes to selling our home.”
3. You’re too focused on your ROI
A house is an investment, and everyone wants a return on their investment. Couple that with emotional attachment, and you’re primed to mark up your home’s value.
“Sellers think that their house is worth what they want or need to sell it for, but the harsh reality is that a home is worth whatever a buyer is ready, willing, and able to pay for it,” says Will Featherstone, a real estate agent in Baltimore, MD.
Even in a seller’s market, there’s no guarantee that you’ll make money on your house. And just because you need $450,000 to buy that house on Greener Pastures Lane doesn’t mean you can sell your house for the same amount.
4. You built it yourself, so you’re emotionally invested
Speaking of emotional attachments, if you built your home yourself, you might have some serious issues with overpricing your property.
Case in point: Ariel Dagan, an associate broker in New York City, co-listed a property for a woman who priced a townhouse she built herself at $18.5 million. Dagan’s team tried to get the woman to lower her price, but she was adamant about sticking with the high price tag and ultimately dropped Dagan and his team from the property.
“Shortly after we were dropped from the listing, the price dropped from $18.5 million to $16.9 million,” Dagan says. “Eight months later, the listing sold for $15.5 million—or 19.35% less than the original asking price.”
So, why does that happen? Dagan calls it the “Ikea effect.”
“Most people who buy furniture from Ikea and assemble it themselves think it’s more valuable than it really is, because they built it,” he explains. “Same thing happens in today’s real estate market.”
5. You’re imagining you’ll haggle
Perhaps the most common reason people overprice their home is because they’re looking to negotiate.
On paper, it sounds like something you’d see on “Pawn Stars.” You offer up a vintage silver tea set at an inflated price. Rick Harrison offers you 25% of that, but he eventually goes up to 30%. OK, maybe “Pawn Stars” is a bad example, but you get the idea: You price your house 10% higher, fully expecting a buyer to try to lowball you, netting you the price you wanted all along while the buyer walks away thinking he got a bargain.
It doesn’t work like that in real estate.
“It’s much better to price it right and create such interest and demand where buyers are chasing you, versus you chasing the market backward [and] searching for the demand,” Featherstone explains.
So don’t be afraid to price your home fairly, or even underprice it—which is likely to attract buyers and boost the price to where it should be.
“Everything sells when it’s priced right,” Featherstone says.
Michelle is a native of Southwest Missouri and has twenty-five years of experience in selling real estate in the greater Springfield area! Michelle specializes in all price points, including new const....