The Home Pricing Myths That Sellers Need to Ditch

When it comes to selling a home, there is one detail that everyone wants to get right – and which everyone else seems to want to weigh in on: List Price.

Finding the right price for your home is an important step on the road to a successful sale, and everyone is looking for that “magic number” – the one that will yield maximum profit, a quick turnaround time, and minimal stress.

Of course, finding that perfect price is easier said than done, and plenty of the so-called advice you’ll hear is actually just hot air… which could end up doing your sale more harm than good.

It’s time to get to the bottom of things! Want to successfully sell your home for the best possible price? Be wary of these all-too-common home pricing myths:

1.) “It’s always best to price your home high.”

You want to make as much profit as possible from your home sale, right? So why not ensure that you get more by pricing your home sky-high at the beginning - then you'll have "room to negotiate", right?

Instead of coming in hot, with some inflated asking price, cool your jets and remember that asking for an elevated market value is not the recipe for a successful sale. For one thing, buyers are comparing your home against all of the other listed homes they can afford. If your home is worth $375,000, let's say, and you price it at $430,000, they'll compare it against all of the homes in the $400,000 - $450,000 range. You'll quickly be viewed as "over-priced", and inferior to their other options. That isn't a knock on your home, but at any price point there are always superior (larger, more updated) homes to be had. 

You'll continue to accumulate market time and wonder why your agent isn't "bringing you qualified buyers." There is nothing an agent can do to convince an informed buyer to pay the same price for an inferior product. 

Rather than assuming that you should go into a sale asking for as much as possible, take stock of your home, your neighborhood, and the housing market around you, and consider that you will ultimately be rewarded by pricing your home right from the beginning.

Working with a real estate team with a deep knowledge pool about your area and a proven track record of success is a great place to start!

2.) “It’s no big deal to lower the price later.”

When you walk into a grocery store and you see that, say, bell peppers are on sale, you stock up on bell peppers. In this situation, price cuts are a good thing; they motivate buyers to act on a product that they may have passed up on otherwise.

And while there have certainly been cases where that principle works for homes, most real estate professionals worth their salt advise against lowering your list price if it can be avoided; indeed, studies have shown that homes that undergo a price reduction tend to sit on the market for longer and sell for less than comparable homes.

You see, homes that lower their price or stagnate on the market tend to develop a stigma; buyers develop a mentality in which they assume that something must be wrong with the listing. In other words, instead of a fresh, ripe, red pepper, they see mold and lumps.

With this in mind, buyers will either pass on your property entirely, or assume that they can low-ball their offer even further, since the seller must now be highly motivated. In either case, you’re not getting as much as possible from your sale – and while your home sits on the market, you’ll still be responsible for paying for holding or carrying costs, including taxes, mortgage payments, and upkeep expenses.

3.) “You’ve done a ton of renovations, so you’re sure to make more.”

A lot of homeowners go to bed with visions of HGTV dancing in their heads.

We understand the appeal! Real estate shows are a ton of fun, and there’s something seductive about the idea of being able to “flip” a property for a huge profit, or transform a “fixer upper” into a goldmine investment opportunity, purely through the power of renovations and remodeling.

But the reality is that those shows don’t necessarily reflect how the home-selling practice actually works.

Before sinking your hard-earned money into renovations, it’s important to remember that the vast majority of updates and upgrades won’t really add dollar-for-dollar value when it comes time to sell your home. In fact, according to Realtor.com, most homeowners rarely recoup their full investment when it comes to renovations, with most getting back 64% of every dollar spent, on average.

With that said, there is evidence that improving a home may help you sell it more quickly, reducing the amount you can expect to pay in carrying costs. It’s also useful to remember that not every home improvement project or renovation is equal; for guidance on this, check out our list of the home improvement projects that tend to offer the highest return on investment. And, ultimately, consult your agent.

But the bottom line? Renovations can make a home more appealing and add aesthetic value, but they don’t automatically translate into profit during a sale.

4.) “You should be able to just reuse the last appraisal to find the right price.”

Perhaps you have in appraisal in hand, either from when you bought the house or when you refinanced it. Surely this valuation still holds up, right? At the very least, it makes for a logical jumping off point for establishing your list price… right?

While we do understand the logic here, the reality is that appraisals are a bit like milk: They have a firm expiration date, and using them once they’ve gone “sour” may ultimately do you more harm than good.

You see, appraisals assign values to properties based around market conditions at a very specific date; the further out you get from that snapshot in time, the less helpful an appraisal will be for establishing the value of a home. In fact, most lenders will not accept appraisals that are more than six months old, since markets can change so much in a relatively short span of time.

If the appraisal is only a week old, it may not be sour, but that doesn't mean its right. An appraiser is rarely a selling real estate agent (and the converse is also true.) Appraisers often cover dozens, or hundreds of miles a day traveling from property to property to assess their "fair market value." They look at historical data, mainly of homes they've never been in. No one can tell you the value of your home as well as someone who sells homes for a living

5.) “You’ll make more money if you go FSBO!” (For Sale by Owner)

Some sellers believe that attempting “for sale by owner,” or FSBO, will help make putting their home on the market easier, and, ultimately, more lucrative.

Their reasoning? With fewer cooks in the kitchen, there will be less red tape during the sales process – and they won’t have to worry about their agent taking their commission off of the final selling price of the property.

While going FSBO does work for some, the reality is that homes sold by owners tend to stay on the market longer and sell for less overall. In fact, according to a recent study, homes sold with the help of an agent typically go for 5.5% more than the limited number of FSBO listings that do make it to sale – which offsets the typical broker’s commission rate, making hiring an agent financially advantageous to the seller!

Here at Real Group, we know the ins and outs of the Chicagoland housing market, and we’ve got the track record to prove it; in fact, we are generally able to sell our clients’ homes at within a few percentage points of their list price, and well above the MLS average.

Looking for guidance? Have any questions? We’d be happy to set you down the right path to selling success. Drop us a line today!

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