Pricing your home based on data, not emotion, can mean a swift sale.<\/p>\n
You don\u2019t need to be Bob Barker to know when the price just isn\u2019t right. Just ask Candace Talmadge. She originally listed her Lancaster, Texas, home for $129,000, but \u201ceventually had to accept the market reality\u201d and chop $4,000 off the price.<\/p>\n
The home\u2019s location proved challenging: Buyers were either turned off by the area \u2014 a lower-income neighborhood south of Dallas \u2014 or unable to afford the home.<\/p>\n
\u201cSellers have to keep in mind the location,\u201d says Talmadge. \u201cWho are going to be the likely buyers?\u201d
\nHome pricing is more of a science than an art, but many homeowners price with their heartstrings instead of cold, hard data.<\/p>\n
Here\u2019s why crunching the numbers is always the better route to an accurate home price \u2014 as well as what can happen when home sellers overlook those all important data points.<\/p>\n
The Pitfalls of Overpricing<\/strong><\/p>\n Homeowners often think that it\u2019s OK to overprice at first, because \u2014 who knows? \u2014 maybe you\u2019ll just get what you\u2019re asking for. Although you can certainly lower an inflated price later, you\u2019ll sacrifice a lot in the process. The most obvious damage: A house that remains on the market for months can prevent you from moving into your dream home. Already purchased that next home? You might saddle yourself with two mortgages.<\/p>\n \u201cYou lose a lot of time and money if you don\u2019t price it right,\u201d says Norma Newgent, an agent with Area Pro Realty in Tampa, Fla.<\/p>\n And worse : Continually lowering the price could turn off potential buyers who might start wondering just what is wrong with your home.<\/p>\n \u201cBuyers are smart and educated,\u201d says Lisa Hjorten of Marketplace Sotheby\u2019s International Realty in Redmond, Wash. \u201cYou\u2019re probably going to lose them.\u201d<\/p>\n The Pricing Traps<\/strong><\/p>\n It\u2019s easy for homeowners to stumble into two common traps :<\/p>\n 1.\u00a0 Conflating actual value with sentimental value \u2014 how much they assume their home\u2019s worth because they lived there and loved the time they spent there.<\/p>\n 2.\u00a0 Assuming renovations should result in a dollar-for-dollar increase in the selling price \u2014 or more.<\/p>\n \u201cMany homeowners think, \u2018Of course my home is worth a bazillion dollars,\u2019\u201d says Newgent. If they put in a few thousand dollars worth of new flooring, for example, they might overestimate the upgrade\u2019s impact on the home\u2019s value into the tens of thousands.<\/p>\n Talmadge\u2019s Texas home came with a built-in renovation trap : It was already the nicest home in the area, making it harder to sell. Major additions had inflated the square footage \u2014 and the price, according to one appraiser \u2014 without accounting for the surrounding neighborhood. That created a disconnect for buyers: Wealthier ones who might be interested in the upgraded home disliked the neighborhood, and less affluent buyers couldn\u2019t afford the asking price.<\/p>\n \u201cDon\u2019t buy the nicest home on the block\u201d is common real estate advice for this reason.<\/p>\n That\u2019s not to say that renovations aren\u2019t worth it. You want to enjoy your home while you\u2019re in it, right? Smart renovations make your home more comfortable and functional but should typically reflect the neighborhood. A REALTOR\u00ae can help you understand what certain upgrades can recoup when you sell and which appeal to buyers.<\/p>\n Another culprit for many a mispriced home is online tools, like Zillow\u2019s \u201cZestimate,\u201d that prescribe an estimated market value based on local data.<\/p>\n The estimate is often wildly inaccurate. A Virginia-area real estate company, McEnearney & Associates, has compared actual sold prices with predicted online estimates for several hundred homes in the area for the past few years and concluded the predictions failed half of the time.<\/p>\n The Right Stats for the Right Price<\/strong><\/p>\n The best pricing strategy? Consult a real estate agent, who will use something called comps (also known as \u201ccomparable sales\u201d) to determine the appropriate listing price. They\u2019re not just looking at your neighbors; they\u2019re seeking out near-identical homes with similar floor plans, square footage, and amenities that sold in the last few months.<\/p>\n Once they\u2019ve assembled a list of similar homes (and the real prices buyers paid), they can make an accurate estimate of what you can expect to receive for your home. If a three-bedroom bungalow with granite countertops and a walk-out basement down the block sold for $359,000, expecting more from your own three-bedroom bungalow with granite countertops and a walk-out basement is a pipe dream.<\/p>\n After crunching the data, they\u2019ll work with you to determine a fair price that\u2019ll entice buyers. The number might be less than you hope and expect, but listing your home correctly \u2014 not idealistically \u2014 is a sure way to avoid the aches and pains of a long, drawn-out listing that just won\u2019t sell.<\/p>\n Knowing When the Price is Too High<\/strong><\/p>\n Once your home is on the market, you\u2019ll start accumulating another set of data that will serve as the ultimate price test: how buyers react.<\/p>\n Agent Hjorten says there\u2019s an easy way to tell if you\u2019ve priced too high: \u201cIf we have no showings, it\u2019s way too high. Lots of showings and no offer means you\u2019ve marketed well \u2014 but it\u2019s overpriced once people get inside.\u201d<\/p>\n Talmadge didn\u2019t struggle with showings. She says a number of people were interested in the home, but not enough at the price. In the end, Talmadge sold her home for $125,000, with a $5,000 seller\u2019s assist, a discount on the cost of the home applied directly to closing costs.<\/p>\n \u201cIt all boils down to location, location, location. In [another] neighborhood, our house might well have sold for well over $130,000,\u201d Talmadge says.<\/p>\n When it comes to finding a buyer, pricing your home according to data \u2014 and the right data, at that \u2014 is crucial to making the sale.<\/p>\n