March 20th, 2012 8:40 AM by Taydus Taydus
An Oakland, California homeowner recently remarked that she was aware the home prices had dropped quite a bit over the last five years. But she felt that her home hadn’t lost any value.
It can be difficult for homeowners to divorce themselves emotionally from a home they have so lovingly decorated, possibly remodeled, and enjoyed. But this is what sellers need to do so that they can make rational decisions about a list price that will actually result in a sale.
This decision should be based on listings that have sold in your area that could be considered somewhat comparable to your home. Some sellers go to open houses to evaluate the competition. If you are still emotionally wrapped up in your home, the exercise can be futile. You return home feeling that the other homes are not as good as yours.
Put yourself in the buyers’ shoes. This is easier for sellers who are also buying in this market. They know what it’s like to want to make sure they are getting a good deal. Your house needs to be listed at a price that is enticing to buyers because it represents a good value. In most areas, buyers are buying in a market knowing that prices may continue to decline before the market fully recovers.
TIP: Be wary of real estate agents who tell you that your home will sell for a higher-than-supportable price just to get the listing. Then they work on you over time until you reduce the price to market value. Some even write a ladder clause right into the purchase contract stating that you will reduce the price by “x” amount every month until the home is sold. Realtors refer to this as “buying a listing” and it is done more often than you may think.
It is hard to resist the temptation of trying for a higher price than the comparable sales indicate. There are a multitude of reasons sellers get caught up in this way of thinking:
If you price your home above market value, you won’t be happy when your home sits on the market for months with little or no activity (or a lot of showings but no offers!) Each time you drop the price it feels like too little too late – you do not want to chase the market! You can end up selling for less later if home prices in your area are still declining. Even if that “perfect buyer” comes along and offers you full price on your overpriced listing, if that buyer needs to secure financing the deal may fall apart when the appraisal comes in a market value.
Refinance appraisals are notoriously inaccurate in terms of market value – either too high or too low. Although a recent refinance appraisal is helpful only your Realtor can tell you if the current market will support the appraised price. An appraiser is attempting to gauge what price a buyer would pay when there isn’t a ratified contract that states what a buyer will pay. A high refinance appraisal can leave the seller with a false expectation.
Listing your home based on what you want or need to net from the sale won’t motivate buyers to pay more. Buyers pay market value. They won’t overpay in today’s market. Be realistic when determining a price for your home. Often times a seller’s “needs” are far above what is “real.” If you “need” a certain dollar amount from the proceeds of your home, you may need to slice it very thin without much walk away money in order to price your home at market value.
Find out what buyers are looking for in your area and see how your home matches up to their expectations. Generally, today’s buyers are looking for a home that is well-located, in good conditions and is price right for the market.
If your home needs a lot of work or cosmetic updating compared to the competition, you will either need to have work done before selling, or discount your price accordingly.
Walk-to locations are highly desirable in some areas. If your home doesn’t offer this amenity, you may have to make a price accommodation. Depending on where you live, views vs. no views may have to make similar concessions.
Homes with level-in access from the street are usually at a premium. If they are difficult to find in your area, you may be able to adjust your price upwards in comparison to similar homes that sold recently but had lots of steps.
Consider a pre-listing inspection. This is a thinking forward strategy and it comes with both pros and cons for the seller. By paying for a pre-inspection from a reputable home inspector in your area (your Realtor can help you find a good home inspector) there will be no surprises at inspection time. Here are the pros and cons: