Apr 24, 2012

10 Reasons Sellers overprice their property.

When putting your house on the market, getting the initial list price
right is critical in selling your home in a reasonable amount of time and
at the highest possible price.
Everyone wants to get top dollar. However, in the zeal to maximize their
return on investment, some sellers try to justify a high sales price with
rationalizations that buyers will summarily dismiss. Here are 10 reasons
sellers often give for why their house is “worth more.”
1. I need to get what I paid for my house: Until a few years ago,
homeowners had become accustomed to the idea that the value of their
house would always go up, and never go down. From 2000 to 2006,
that belief went into overdrive when people started to think the sky was
the limit on how much equity they could build into a piece of real
estate. Then reality hit, and we all found out that it was possible for
prices to go down.
Unfortunately, the current market value of a home really has nothing
to do with the original purchase price.
2. I need to get a certain amount for my current house to afford the
one I want to buy: If you’re moving up to a bigger, better house, every
extra nickel you get on the one you’re selling will help make the new
one more affordable. The only problem with that thinking is that
potential buyers for your home don’t really care about where you’re
moving. They’re only concerned with how the sales price of your house
compares with similar properties that have recently sold.
3. I need to recover the money I spent on improving my house: Every
year, Remodeling Magazine publishes a report that compares the
construction cost of common remodeling projects with how much of
that cost is recovered when the home is sold. Many sellers want to
believe that if they spend $100,000 fixing up their house, they’ll
increase the value of it by $150,000. But, according to the Remodeling‘s
Cost vs. Value report, it’s wishful thinking that you’ll recover all the
money you spend on improvements.
For example, the national average cost for a major kitchen remodel is
over $110,000, but the statistics show that you’ll only recover $64,000
or 58 percent of that in the sales price. In fact, out of the many
remodeling projects they track, there’s only one that will reliably return
more in the sales price than it cost; that’s replacing the front door.
4. I heard my neighbor’s house sold for more: There are a number of
subjects where people tend to stretch the truth. You know what they
are — how big that fish was, my golf score, how much weight I lost and
so on. Well, one that undoubtedly makes this list is how much I got for
my house.
No one wants to admit they made a bad investment. We all take great
pride in our homes. We’ve worked hard on them, and it’s human nature
to want the measure of that effort (the sales price) to reflect our sweat
equity and choice of improvements.
What you hear over the fence about sales prices is frequently
inaccurate. Sometimes, the number is just plain wrong. Other times,
the sale took place several years back, when the overall housing prices
were much higher, or the sales price doesn’t properly deduct seller
closing cost help.
5. I want to have more bargaining room: These days, there’s no doubt
that buyers aren’t often inclined to offer full price. It’s not
unreasonable to give yourself a little bit of bargaining room. But there
is a limit to how much bargaining room you should build in.
If you price the house out of the ballpark, buyers will think there’s no
chance their offer will be accepted, so they don’t even bother making
an offer. Clearly, there are some buyers out there throwing low balls,
hoping they can steal a place. Most want to make an offer that the
seller won’t see as an insult. So, keep your list price within the realm of
reasonableness, or you will find yourself with no offers and perhaps no
6. I’m in no hurry; I can wait for my price: If you’re in a market where
home prices are rapidly increasing and you start out at a high list price,
the market will catch up with you. But, if you’re in a market like we
have now, where prices are flat or slowly increasing, an initially high
price may not come into sync with the market for a very long time.
Also, buyer expectations in a weak market are different than when it’s a
seller’s market. Buyers want a good deal, so an overpriced house can
quickly become stigmatized as a property that’s not a good deal.
7. I want to start high; I can always come down: The first few weeks
that a house is on the market are very important. During that time,
both agents and buyers formulate a first impression about your
property. As we all know, first impressions are critical, and once they’ve
been created, they’re hard to change. Even if you reduce the price, it
will be difficult to shake the image that your house was overpriced. This
is especially true in today’s market.
8. I think my house is unique: For one reason or another, we all believe
that our house is the best one on the block. Sometimes, there might be
legitimate reasons why one house is superior versus another. On other
occasions, beauty is in the eye of the beholder.
For buyers, they’re going to emphasize everything that’s wrong with a
house to help justify a low offer. Conversely, sellers are going to play
up even the most minor qualities that may make their house better. The
truth usually lies somewhere in the middle. Your agent is a good
resource to objectively assess what aspects of your property really
contribute to its market value.
9. We need to find just the right buyer: There are times when a house
has some unique characteristic that will inspire “just the right buyer” to
pay top dollar. But those situations are rare, and finding that buyer
might be like looking for a needle in a haystack.
Furthermore, even if you locate that special buyer, the perfect matchup
of buyer and property isn’t going to mean someone will be willing to
pay $800,000 for your $500,000 house. They’ll still look at the comps
and still try to get it for market value.
Plus, thinking your agent can find that one buyer in a million is an
unreasonable expectation. No agent has the ability to target the market
with that level of precision.
10. I don’t need to sell: There are sellers out there who aren’t all that
motivated about selling their house. Some just want to stick their toe in
the water and see if they can get lucky and snag a buyer who’s willing
to pay more for their house than it may really be worth.
Buyers are very sophisticated these days. They have immediate access
to endless amounts of information regarding the value of a property.
So, getting lucky isn’t likely to happen. And, since a real estate agent is
going to personally bankroll a significant amount of time and money to
put your house on the market, you probably shouldn’t employ their
services until you’re sure that you actually intend on selling.

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