It’s true that I am biased because I am a Real Estate Professional; however, it is also true that I think the services we offer are for the good of our clients and the community as a whole. Some people mistakenly think that by putting their home on the market themselves they will increase the money they profit from the sale. I want to use the next few blogs to talk about a few things sellers should fully consider before doing this. In this blog let’s look at the idea of price.
Sooooo, The Price is Right
“You NEVER have a second chance to make a first impression.” I don’t know where this quote originated but it rings true in our basic psychology whether we want it to or not. We make judgments and categorizations about people, places, and experiences the first time we come into contact with them. If these are poor or sub-par, future impressions must battle this negativity even if the introductory impression was an anomaly, it will take time to overcome and change.
Let’s apply this premise to selling your home. Another natural instinct is to price our belongings by assessing how much WE value them instead of using a more scientific approach to determine what they are really worth. Many people who put their home on the market “For Sale By Owner” don’t have the access or understanding of the housing market (frankly because they aren’t professionals) to determine an accurate price for their home. They introduce their home with an inflated number thinking “…we can always drop the price if it doesn’t sell.” This is a problem. A listed home never gets as great a frenzy of attention and interest as when it debuts on the market. (Yes, we do have tricks and ways to generate interest later on, but organically, the first listing draws natural attention.)
If a home is listed just outside of a certain price range, a seller can lose an entire group of buyers whose searches have a top end range threshold. For example: By pricing a home at $304,000.00 sellers have lost buyers who search for homes up to 299,999.00 or even 300,000.00. Everyone has to have a cut off price. In this case would the potential $4,000 (or 1.3% of the price) be worth the loss of lookers? I doubt it. Then what is it worth if activity is decreased?
So, if the seller does begin to drop the price, do they come to the right price then or do they decrease it by too small of increments? If the price gets cut a series of times, buyers may get the impression – whether it’s right or wrong, that there is something wrong with the property. Again, this becomes a battle to prove the suspicions aren’t warranted rather than focusing on the positive attributes of the home. And if by chance there are one or two challenges to the property? Potential buyers may give them more weight and reason that these must be why the home hasn’t sold.
Using comps and local market knowledge to price a property correctly the first time will invite the most activity and draw people to look at the home. Many times, this will create a situation of multiple offers where the BUYERS decide how much more they are willing to pay because of competition. This will also increase the speed of the sale. Sellers sometimes lose sight of the hidden costs of waiting too long holding out for a slightly higher offer may mean they are spending that very wanted increase in profit on property maintenance.
Another potential situation, which admittedly happens less frequently but does occur, is when the seller undervalues their home. This can be due to not understanding a local housing market that has a current low inventory or a positive trend of buyers seeking to live in that area or school zone etc. It may also happen because sellers are desperate or think they are in a great hurry. This not only hurts the profit margin for the seller, it hurts the whole community. Once this lower price is in the records, it affects the comps for the area. This is also how multiple foreclosures or short sales in an area can negatively affect the neighborhoods property values.
In all, a professional can help sellers price their home correctly from the beginning and even though the number may be less (sometimes it isn’t) the net profit is actually increased and if you factor in time on the market it is a clear advantage.
This is just one of the reasons I think using a professional in real estate is the smart decision. Watch for the next blogs as I explore a couple more reasons to Rethink Going “For Sale By Owner”. What next? How having a Professional as a Negotiator really makes a difference.
For more information, or to set up a meeting, please visit www.blakerickels.com