A popular TV show since 1972, “The Price is Right” has people contend against one another to guess the closest price of an item without going over the actual value. If they guess too high they lose.
Much like the TV show, real estate often works along the same line. If the price of your home is too high, you could lose to someone who prices it right.
It is natural when selling your home to want to get top dollar and hit a home run by maximizing your profits. Today’s buyers are more educated than ever before, with access to information readily available online. Much like you don’t want to under price your home, people also don’t want to overpay.
Here are some pricing mistakes you should steer clear of.
The emotional price point
If you have set the price of your home based on emotion you need to hear the “It’s important to be objective” speech.
Buyers won’t take into consideration how much you paid for your home, how much you have invested into your home, or how much you need to get out of your home. A property is only worth what someone (else) is willing to pay for it, and not a penny more. So do your research to measure up what the market expects versus the price in your head or get a third party unbiased opinion from an accredited appraiser before setting your price.
Let’s just see what happens
You only get one shot at a first impression and that also holds true in real estate. People make mistakes. The important thing is that we learn from our mistakes. If you have overpriced your home you need to admit your mistake and adjust your price to the correct market value. “Death by a thousand cuts” is a reference often made in real estate for a home that has started way too high and then lowered their asking price multiple times. These multiple price reductions often result in a longer time on market, as well as a lower selling price and can be hard to swallow, resulting in a more frustrating selling experience.
Setting the price high because you aren’t in a rush will only result in your home sitting on the market. Houses that start by being priced too high, often sit on the market, and become stale. Buyers can easily find out how long your home has been listed for, and if your home has been sitting there for a long period of time, buyers will start to ask things such as ” What is wrong with this house?” “ Why has no one bought it?”
Now you are not only wasting time, but also potentially losing buyers and money. Don’t just “test the water.” You need to either be all in or be out. List your home when you are serious about selling, and price your home properly right from the start. You have a greater chance of selling if you’re not just on the market to simply see what might happen.
Inflating your price to cover agent commission fees
Buyers have a limit in what they are going to pay, just like sellers have a bottom line. Real estate commission could be the factor in lining these two thresholds up. A real estate transaction doesn’t have to be so costly. At the end of the day, what should matter more to you is what goes in your pocket, and less what your home sells for.
The true cost of using the traditional real estate commission model is typically (but not always) 5% plus HST (in Ontario). As an example, selling a $300,000 home could cost you around $15,000 in commission plus about $1,950 in HST.
An alternative to high commissions would be selling your home yourself with the assistance of a high tech, high touch marketing company like PropertyGuys.com. Typical marketing packages could cost 10 times less than you would expect to pay a traditional agent. This flexibility could also allow you to list your home at the right price without affecting your net profit.
Pricing your home is not rocket science, but it is a science. With a little market research, a third party unbiased opinion from an accredited appraiser, and your new knowledge of what to look out for, you are well on your way to setting a fair market price that ultimately will lead to a sold sign on your lawn!Jason Schlegel,