Confronting Pricing Myths
Pricing Your Home Incorrectly Could Slow the Sale of Your Home
Putting your house on the market can be an emotionally exhausting task. You have to confront questions that involve not only big money but also an intensely personal asset-your home: What's my house really worth? Should I sell on my own to save the agent's commission? How can I be certain I'm getting the right advice about listing, negotiating, and selling smart in today's market?
Along with these tough questions, you come face-to-face with some enduring myths about the homeselling process. They're so widespread that it's wise to know about them in advance. If you make moves based on facts, not myths, you'll fare far better in the selling process.
Myth: The real estate agent will set the price for my home.
Agents don't set any price. However, they'll suggest a price based on their assessment of not only your home but also the current state of the market. Most agents are careful to suggest a range rather than a dollar amount, and it's then up to you to accept or reject that recommendation. Their recommendation is usually based on a rigorous review of comparables-houses similar to yours that have sold in recent months.
Myth: I should always list with the agent who recommends the highest selling price in the comparative market analysis (CMA).
Wrong. The CMA is just one of many factors on which to base a listing decision. The CMAs from several agents competing for your listing will probably all fall within a similar range. But if one agent's CMA is significantly outside that range-especially on the high side-don't make that the key reason for giving that agent your listing. Go with the agent whose total marketing presentation, track record, and rapport with you add up best.
Myth: If I sell my house myself, I'll net more money because I won't be paying the agent's commission.
Many people look at the fee an agent stands to earn on a home sale and wonder whether there's a cheaper way to sell. In some red-hot real estate markets-where buyers are lining up outside your door with offers and competing for your home-it's possible to do just that. But Most markets aren't anywhere near red-hot. Many are soft, sluggish, and slow-the very worst climate for solo sellers or for-sale-by-owners (FSBOs).
The experience of sellers I've spoken with in past years around the country confirms the fact that when you go on your own in a buyer's market, you stack the odds against yourself terribly. For starters, your home won't be listed in the multiple listing service (MLS), which is the number one sales tool for marketing a house.
And despite your best desire to avoid having to pay a commission, most buyers who respond to your newspaper ad will discount out the commission you plan to pocket. That is, they'll subtract it from your asking price even if you've already done so. The result is that you'll get far more "lowball" offers than if you were working with an agent.
Then there are the sheer practical aspects of selling on your own. Do you have the time or the flexibility to show the house during your regular working hours? That happens to be when many buyers want to visit properties and spend time walking through them with the agent they're working with.
Another important flaw in the I-can-save-by-selling-it-myself theory is that although you may think your negotiating abilities will stand you in good stead when you deal one-on one with potential buyers, the odds are that you're mistaken. Face-to-face negotiating in the kitchen or living room blows up more FSBO sales than almost any other cause. Rather than having a cool, unemotional buffer-that is, an agent-between yourself and the buyer, you're all alone, and the buyer's demands almost inevitably get you steamed up. After all, the buyer's negotiating strategy will always be to knock down your price by pointing out every imperfection-real or otherwise-in your house.
The hard reality is that if you want to get maximum value for your home, it makes little sense to fly solo. That's why a lot of FSBOs come in out of the cold after a few months and list with a professional.
Myth: Homes always appreciate.
Spoiled by real estate markets in which median price values went up for years (peaking in RI in 1989 and then again most recently in 2005), many homeowners incorrectly assume that their house will appreciate at levels far in excess of other investments. Yet, real estate, like every other important segment of the economy, runs in cycles, If you bought a home at the top of the market cycle but sell it at the bottom, you may end up taking a loss. On the other hand, you might have bought during the bottom of the cycle and can now walk away with a significant gain.
In soft markets, sellers often believe they're losing money. However, their losses are usually only imaginary, involving money they were never going to get anyway. But because they had such high expectations, they see themselves as suffering a loss.
Myth: There's no need to make sure I'm setting an accurate and reasonable price for my home, because I can always lower it later.
Sure you can. But in the meantime you've blown your chance of selling it within a reasonable time frame to buyers who would have been interested if your initial price had been realistic.
Pricing too high-leaving too much padding for later negotiating-is the surest technique for leaving your house dead in the water for months or even years. And when you finally correct your asking price to the true market level, you'll probably end up with a lower selling figure than you'd have obtained by having a realistic price from the start.
(Excerpted with permission from the Home Guide, "Shatter the Big Eight Myths of Pricing Your Home," published by the NATIONAL ASSOCIATION OF REALTORS®)