Pricing a listing can be one of the trickiest parts of the home-selling experience, and it's very easy to get your pricing wrong if you rush through this part of the process. Over the years we've noticed a few relatively common mistakes that cause sellers to either over-price or under-price their listing. Here are 8 common mistakes to avoid as you go about the process of pricing your home.
#1: Not taking seasonality into account
Time of year can have a big impact on a home's value. For instance, competing offers and bidding wars are most common in the springtime when buyers are out in droves. In the springtime it's easy to under-price a listing if the momentum of the market isn't taken into account. On the flip side it's easy to over-price in the fall if seasonal cooling isn't taken into consideration.
#2: Placing too much emphasis on square footage
It's logical to assume a larger home is generally worth more than a smaller home, but very often this assumption isn't true. Usually it's the quality of the square footage that counts more than the quantity. Most buyers will gladly pay a premium for the home that's loaded with quality finishes and upgrades. On the other hand they'll discount the home that needs a lot of cosmetic work.
Another factor to consider with square footage is above ground versus below ground space. Above grade space is generally worth more than below grade space, especially if the below grade space doesn't have a walk-out. When comparing two properties it's always a good idea to understand how much of each property's finished space is above versus below grade.
#3: Expecting a dollar-for-dollar return on all improvements
Simple cosmetic updates - like new paint, flooring, and lighting - almost always provide a high return on investment. That's why we commonly focus on these 3 areas when we're staging a home for sale. Other big ticket items like large kitchen and bathroom remodels are highly valued by buyers and can substantially increase a home's value, but they don't typically provide a dollar-for-dollar return at re-sale. If you're contemplating an expensive kitchen or bathroom upgrade, don't do it expecting a dollar-for-dollar return on investment. Do it instead for the personal enjoyment you expect to gain from it.
#4: Confusing home maintenance with home improvement
There are some types of improvements (for example, a new roof or a new furnace) which really fall under the category of home maintenance. Most buyers expect a well-maintained home with the roof and all of the mechanicals in good working condition. Keeping a home properly maintained addresses buyer expectations and helps to sell a home, but it doesn't necessarily provide a dollar-for-dollar return on investment.
#5: Ignoring differences in floor plan or layout
A clunky floor plan or layout can negatively affect the value and marketability of a home. For example, properties with a very compartmentalized floor plan are generally less popular than those with more open layouts. Also, tri-level properties tend to be less popular with buyers than ranch style and traditional two-story homes.
#6: Ignoring differences in location
Subtle differences in location often have a big impact on market value. Here are five questions about location to consider for your own home.
Is your property located on a busy or a quiet street?
Does you home belong to a popular or a less popular school district?
Is your home located next to an apartment building?
Does your home sit on a corner lot or a more traditional lot?
Does your home offer convenient access to shopping, dining, and recreational amenities?
Asking these and other location-related questions will help you assign the right market value to your listing.
#7: Relying too much on a previous appraisal or assessment
Previous values assigned by a bank appraiser or the city tax assessor can be used as inputs into the pricing process, but they shouldn't be used to set the list price for your home. Appraisals and assessments focus a lot on raw numbers. For example: the square footage, number of bedrooms, and number of bathrooms.
They tend to place much less emphasis on other important factors: things like the quality of the finishes, the desirability of the floor plan, and subtle differences in location. Very often these intangibles are what matter most to buyers. For these reasons you should always use an agent-assisted market analysis to price your home. Your analysis should cover the raw numbers, the momentum of the market, and the other more subjective factors that impact your home's value.
#8: Pricing based on want versus what the market will bear
This may be the most common pricing mistake of all. Sometimes a seller has a price stuck in his head which is based more on "want" instead of what the market will bear. We see this a lot with listings that sit on the market for months or sometimes even years at a time. One way to avoid this trap is to seek price opinions from two or three different real estate agents. Getting several different professional opinions (and asking a lot of questions) will help ensure you get the perspective you need to choose the right price.
For more home and condo pricing information
Check out this article which covers our 6-step approach to pricing a listing. Do you need a market analysis completed for your property? Give us a call, and we'll set up an appointment for a short meeting at your home.
This article is published courtesy of: Dan Miller, REALTOR Mad City Dream Homes & RE/MAX Preferred