5 Most Common Myths About Pricing a Home
Over the last few months the overall Real Estate Market all across the country has really slowed down. This is a cause for a lot of frustration among home sellers and Realtors. When a home does not sell the price has to be reevaluated. What’s the most common reason a home won’t sell? More often than not it is overpriced.
Overpricing is not always a seller’s or Realtor’s fault. Over the summer everyone was basing their pricing on the sold homes from the spring. At that time no one knew we were in for a market slowdown. So now with the benefit of hindsight many people are realizing that their price was too high and this has caused many sellers to lower their price this fall. Pricing a home is very tricky and the timing of the market picking up or slowing down makes it even harder.
Here are 5 common myths about pricing when selling your home
Myth #1: Price the Home Based on What You Need or Want
Fact: Buyers don’t care what you want for the home. They will only pay what they think the property is worth, and only what they are willing to pay.
Some home sellers price a home according to what they want or need. A home seller may have a number in mind that they want in order to cover moving costs, commission, or to make a profit. The fact is, if the list price for a home isn’t based on the current market value of the home, it will sit on the market for a long time. Buyers will look at how long the home has been on the market and wonder what is wrong with the home and why it hasn’t sold yet, resulting in no showings. Buyers are not interested in overpriced properties
Myth #2: A Home’s Assessed Value is the Same as the Market Value
The assessed value of your home is how your property taxes are calculated. Property assessors are not required to change the assessed value of properties to reflect the current market value, and in today’s market, these two values can differ greatly. The assessed value of your home has very little relevance to its market value price.
Myth #3: Calculate What You Spent on Upgrades into the Home Price
Fact: The amount you invested in improvements cannot always be recouped dollar-for-dollar in the asking price for your home
This is especially true for investments in a home’s basic structure or maintenance—such as a new roof. In a cost to value report from Remodeling Magazine that compares the average cost of remodeling projects with the value these projects retain at resale in the metro Boston area, a bathroom addition will only recoup about 51% of the total cost. Some renovations, such as a new deck or siding, can yield a larger return, but at most 70% of the cost.
While it’s true that some home remodeling projects add value, depending on the market, sometimes you won’t get a 100% return on the total amount of your investment when selling your home
Myth #4: Base the Home Price on What Similar Homes Are Listed For
Fact: The selling price for comparable homes in your neighborhood, not the listing price, is the most accurate factor in determining price.
Many home sellers incorrectly list the home price based on what other homes nearby are listed for. Homes can be listed at any price, but the price they actually sell for is what should be used in the pricing formula.
Myth #5. Keep the Home on the Market Until You Get the Price you Want
Some sellers will even say, “We’re in no rush to sell. We can wait.” But leaving the home on the market drives the price down. Homes sell for the most money within the first few weeks of being listed or the first few weeks of a price adjustment.
We ran a report of the homes sold in Massachusetts from January to November of this year, and compared the days on market for total homes sold. As you can see from the chart below, when a home is priced correctly at the very beginning, it will sell faster and for a higher average price than homes that stay on the market for a long time. In fact, the average sale price for homes on the market from 0 to 30 days was actually higher than the average list price.
|Days on The Market||Average List Price||Average Sale Price||Difference|
|0-30||$ 454,418||$ 458,573||-1%|
|31-60||$ 409,010||$ 400,809||2%|
|61-90||$ 404,019||$ 391,727||3%|
Source: MLS Property Network, Inc. Total Sold; Days on Market: January 1 201 to November 13, 2014
For homes on the market longer than 30 days, the average sale price was lower than the price the home was originally listed at. For instance, homes on the market 31 to 60 days sold for $8,201 less than the listing price. Homes on the market even longer—61 to 90 days—the homes ultimately sold for $12,292 less than the original list price.
These numbers were true for all price ranges. Homes below $200,000 priced correctly initially sold just as quickly as homes priced correctly above $200,000.
Remember, homes sell for the most money when they’re sold in the first month, so price it right from the very beginning.