How to successfully sell your home for sale by owner #1 - PRICE
During the summer there was very few for sale by owners (judging by the lack of yard signs) in Highlands Ranch CO. Suddenly there is a rush of activity and everyday more and more signs are popping up in the area. Some, a few, very few for sale by owners will be successful in selling their own home. Most are not.
How can FSBOs get their houses sold? #1 - PRICE!
THE hands-down-biggest mistake that the for sale by owners make is - you guessed it - pricing their home too high.
When pricing their home all rhyme and reason seem to go out the window and a price tag is put on the home. BAM! $650,000.
How did the FSBO determine this price?
- What they paid for the house
- How much they put into the house (remodeling etc.)
- How much they would like to get for the house
- How much the neighbors got for their house (rumored price)
- How much they love the house
- How much over the comfortable price they have to leave "negotiating room" since the buyer will try to bargain
- and in some cases: how much they have to get without having to bring money into the table
As a seller, it is very hard to objectively look at what the value of the home actually is: based on what recently sold nearby and how the houses are moving in general in that area and so on.
And when somebody, anybody tells them what the approximate value is - and when that value is much lower that what the sellers anticipated - it is very hard to swallow. When we tell the seller the approximate value of their home, there is never an intention to offend them.
So, how do they digest this value? Should they trust it? Why should they?
One word, APPRAISAL!
In the Colorado Contract to Buy and Sell Real Estate there is a section called APPRAISAL PROVISIONS. In this section the buyer checks a box to either have appraisal condition applicable or not. Most of the time the buyer will select the box that states:Conventional/other or FHA (meaning applicable). What does this mean? It means that if the house DOES NOT appraise to the purchase price that is agreed upon and is written on the contract, the buyer DOES NOT have to buy the home!
It says: Buyer shall have the sole option and election to terminate this Contract if the Purchase Price exceed the Property's valuation determined by an appraiser engaged by ___________ (the line usually says -buyer's lender).
Sometimes the difference can be minimal, e.g. $300 and the buyer may choose not to worry about it and proceed with the purchase. However, in most cases, the sellers either have to come down to the value set by the appraisal (or close to it) or not and lose a buyer. And then come down to a reasonable price for the next possible buyer. Tough.
Buyers, especially those 95+ percent that are represented by real estate professionals are very well educated on this and many will not even go into a home that they feel is waaaaaay over priced. They know what the other homes sold for.
Conclusion: A house priced at $650,000 in a neighborhood where a similar but slightly superior house sold for $525,000 is most likely to have some appraisal issues. The estimated value for the home would realistically be from $500,000 to 525,000. (The asking price can be decided from there). This price is not decided by the real estate agents. It is decided by able, willing and qualified buyers that have recently purchased similar homes is the same neighborhood.
FSBOs be smart, be safe and we sincerely wish you luck selling your home.
Stay tuned - How to successfully sell your home FSBO ~ #2 - CONDITION
Contact Brian Burke, Managing Broker with Kenna and Co. Real Estate @ 303.955.4220 to list your home for sale or to purchase a home in the Metro Denver Area, including Douglas County, Castle Rock, Highlands Ranch, Lone Tree, Littleton and Parker. Your referrals are always welcomed. |
Disclaimer: This post does not intend to be and does not provide any legal advise and should not be considered at such.
Disclaimer: Kenna and Co. Blog does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied. Blog posts on the Kenna and Co. Blog represent the opinions and ideas of the author(s). Kenna and Co. Blog does not express the views of Kenna and Co. or those of the broker.
Copyright 2008.© Kenna and Co. Rita Burke. All Rights Reserved. Sept 18th 2008. "How to successfully sell your home FSBO ~ #1 - Price!"
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