As with any good myths, they pick up momentum over time and become so ingrained that folks start to believe them and stop questioning the validity of information. When it comes to real estate, those myths can cause home sellers to miss opportunities. For that reason, I wanted to share 7 of the common myths about pricing your home.
1. You always make money when you sell a home
I so wish this were true. I really do. Yes, real estate tends to appreciate over time. The National Association of Realtors® estimates that home prices will jump 5% by the end of 2017 and continue rising 3.5% in 2018. However, this is a general nationwide statistic and may not be reflective of what is happening in your immediate community or factors that influence the value of your specific home. Selling your home for more than you paid is by no means a given.
2.Price your house high to make top dollar
We hear it occasionally: "We will never know unless we try. Let's price it higher to give it a shot." The challenge with this is that if you start with an overpriced house, you may miss out on that upfront traffic with a new listing, which you can never get back. Overpriced homes typically don't sell. Agents working with buyers will know all too well when a home is overpriced, and advise their clients to steer clear.
3. If your home's overpriced, just lower it later
Overpricing your home isn't easily fixed just by lowering it later on. Rather, they sit on the market for prolonged periods of time and draw unfavorable assumptions with agents and potential buyers alike. Homes that have lingered on the market for months—or that have undergone one or more price reductions—make buyers presume that something must be wrong with it. As such, they might still steer clear, or offer even less than the price you're now asking.
4. Pricing your home lower is never a good thing
Understandably, sellers are often leery of pricing their home on the low end. But as counterintuitive as this seems, this strategy can sometimes pay off. Lower-priced homes drum up considerable interest, which could result buyer competition, which could drive your home's price past your wildest dreams.
5. You should add the cost of any renovations you've made into the list price of your home
Let's say you overhauled your kitchen or added a deck. It stands to reason that whatever money you paid for these improvements will be recouped in full once you sell—after all, your home's new owners are inheriting all your hard work. Unfortunately, while your renovations might see some return on investment, you'll rarely recoup the whole amount. On average, you can expect to get back 64% of every dollar you spend on home improvements. Plus that profit can vary greatly based on which renovation you do.
6. Past appraisals should be used to price your home right
If you have an appraisal in hand, from when you bought or refinanced your house, you might think that’s a logical place to start to price your home. But, an appraisal assigns your home a value based on market conditions at a specific date, so it becomes old news very quickly. In fact, lenders typically won’t accept appraisals that are more than 60 days old.
7. Your agent might overprice the house to make a bigger commission or they may under price it to make an easy sale
First, if you hired a trustworthy, professional Realtor, this should not be an issue. As for overpricing a home, the difference in commission is typically negligible. For example, the difference in commission between a $300,000 house and one that's $310,000 is about $150. An agent does the best they can to price it to sell quickly and for top dollar. Just as overpricing a home is dangerous, under pricing significantly can also be a dangerous slope. An easy way for you to get comfortable with the pricing your agent is suggesting is to examine the data. What are homes selling for you in your immediate area. How long are overpriced homes sitting for? Be sure your agent is performing and sharing a comparative market analysis as part of the process for pricing your home.