Selling your home can be a stressful situation. Getting a home ready to sell takes a lot of work – decluttering, touching up paint, making sure the yard looks great, picking the right agent (choosing Kip Johnson is always the right choice!), reading over contracts. But all these things could be completely useless if you do just one thing wrong.
You must choose the right price at which to list your home.
The Sale Doesn’t Revolve Around Real Estate Marketing
Marketing is important, but today’s world is Internet-based, and every website that has anything to do with real estate will have your home on it within 15 minutes of it going live, without your agent doing a thing. Agents aren’t always open about this, but those listings go up automatically. Some would prefer you to think they are manually inputting your home onto these listing sites, but I prefer to be transparent here – it’s all automated once a home is put into the MLS (Multiple Listing Service).
Professional photography is also necessary, but if your agent is taking pictures for marketing with his cell phone or having a friend do it to save money, he won’t be in business long. You can always request a redo if you’re unhappy with your listing pictures, because this is what people will see first and you want to make a good impression.
There’s very little an agent can really do to set their real estate marketing apart from other agents’. If I had to guess, something like 90% of agents get professional photos of the home, put a sign in the yard, make a flyer, post the home on their social media channels and some type of social marketplace, and then they sit back and wait for a buyer to appear.
Now don’t get me wrong, there are some advanced ways to get more eyes on your property. Me and maybe 10% of other agents know about these things and follow through with them on a regular basis. For more info on these real estate marketing tactics, I suggest reading through my free ebook, Home Seller Secrets. But most fancy marketing schemes aren’t going to help you sell your house for more money if you list it at the wrong price right out of the gate.
If your house has been sitting on the market, I can almost guarantee you that it’s because the price is too high.
It’s not the marketing, or your agent, or because you’re not having enough open houses. We’re not in a 2008 housing market where homes just didn’t sell; prices would be dropping drastically if this was the case.
Homes priced correctly don’t just sit. They sell relatively quickly; we see this every day of the week and every month of the year.
The Cons of Overpricing Your Home
I know what you’re thinking and I understand that you may want to list your home at a price higher than your agent suggests. Two thoughts probably entered your mind:
1. “If we start a little high, maybe we will get that one buyer who falls in love with our home and is willing to pay a premium.:
2. “If we start high, we can always come down.”
This thought process behind initially overpricing your home is going to cost you a ton of money.
Let’s think about this another way. If you were going to buy a car, would you overpay for it? Probably not. How would you know if you were overpaying or underpaying? We all rely on Kelly Blue Book. You would simply look it up and make your decision based on that.
Although home buyers don’t have a Kelly Blue Book, they do have something that’s just as good: A seasoned Realtor. Most agents can walk into a house and have a good idea what its value is within a few minutes. Then, once they go back and spend a few more minutes online, using specific valuation tools, they can give you an informed opinion of value.
No one wants to overpay, especially on a purchase as big as a house, even if the house is a perfect fit for them. I have seen it many times:
A buyer will go to an open house.
Fall in love with the house.
Go back multiple times, saying they love it, measuring the rooms to make sure furniture fits.
Say they’re going to talk to their agent and write an offer.
Then they completely disappear and we never hear from them again.
It’s not that they’re lying about being in love with the house or that they didn’t want to write an offer. They did.
But then they talked to their agent, and the agent most likely informed them that the house was overpriced by however many thousands of dollars. That’s when the buyers’ minds completely change.
You may wonder why they wouldn’t write an offer for what they thought the value was. Some buyers might but some will think, “Why would I start a multi-stage negotiation with someone who has an over-inflated value on their house?” Many will also wonder why they would take themselves out of the market to negotiate on this overpriced home. A home that they love just as much that isn’t overpriced may come on the market, and then they would be stuck in this negotiation over a house they may not be able to get down to a reasonable price. Once you make that first offer, you can’t go and make an offer on another house until your offer is rejected.
Here’s another aspect to consider. The first two weeks of your home being on the market are prime time to sell. It’s when your home is new to the market. The MLS is the system that Realtors use to post your home for sale, but we also use it to help our buyers find homes. When working with buyers, we create a profile for each buyer. These profiles have criteria for the home that the buyer is looking for.
For example: A buyer desires a home with 3 bedrooms, 2 bathrooms, over 1200 square feet, and between $300,000-$400,000. That buyer is going to be sent daily emails with homes coming on the market that fall into that criteria. If buyers are being sent hundreds of well-priced homes that match their criteria, they will soon have a good idea of what quality of home they will be able to buy for a particular price. Then if your home comes into their search when it’s overpriced, it will stick out like a sore thumb. Your home will stand out because it won’t be up to the standard they have become accustomed to, so they will pass it by.
Ramifications of Listing at the Wrong Price
Why is this important? Because within the first two weeks after listing, when your house is new to the market, people are going to be passing on it. A month down the road, when you decide to drop the price to where it should have been in the first place, people have already assessed your home as something that’s overpriced. It has become a home they don’t want and they will just skip over it again and again because it’s old news.
Any new potential buyers who see it at its improved price for the first time will also see how many days it has been on the market. When they see it’s been listed for awhile, they will begin to question what’s wrong with. I get buyers all the time asking me, “This home has been on the market ___ days, what’s wrong with it?” or “Why hasn’t this home sold yet?” My answer is usually, “Nothing, the seller was probably insistent on listing at the wrong price!”
Sometimes when this happens, the only way to get the home sold is to get the price down to where it’s a perceived as a good deal. A good deal is when the price is below the true value. In other words, you’re making less money than you potentially would have if the initial price was right.
I want to leave you with this graph from Realtors Property Resource (RPR). Realtors use RPR as a source for great information when determining the value of homes for both buyers and sellers.
The chart displays the average percentage difference between the listing and selling prices, measured against the length of time properties were for sale in this market. It also displays the number of properties sold within each respective time frame.
You can see that many homes sold for just slightly less than asking price within the first 30 days of listing. Within the following 30 days, there was also a large demand for homes, although the sale price did drop a little more. After 60 days, you can see that prices dropped more significantly and fewer homes were sold. This is when people who listed too high were forced to drop prices in hopes of getting someone to bite. Eventually, after enough time passes (along with more carrying costs and time wasted on buying your own new home), that one person might come along and see the value in what you’re asking, but most people cannot afford to wait four or more months for their home to sell.
If you would like a realistic home evaluation for your home or need a seasoned realtor to make sure you don’t over pay on your next purchase. Feel free to call or email any time.