With
the credit crunch and huge amount of competition from distressed
properties, "normal sellers" have had a tough time getting their
properties sold. If you must sell in this market, it's absolutely
critical that you price your property right.
Pinpointing the
best possible price for your home can be a challenge. If you overprice
your property in today's market, it can stay on the market for months.
If values in your area are declining, the longer you take to sell, the
less money you will net. If you want to net the most from your real
estate sale, avoid these common seller pitfalls:
1. Basing the list price for your home on the list price of other properties
This is probably the most common mistake that sellers make. They look
at what other properties are listed for in their neighborhood and base
their price on those numbers. This is a huge mistake. To correctly
price your property, the only accurate "comparable sales" are those
properties that have closed either for all cash or where a lender has
funded a loan. While properties may be selling, many are not closing
due to the credit crunch. Appraisals are a huge issue. The reason is
that a property worth $200,000 today may be worth $196,000 when it
closes 60 days later. Appraisers are aware of the issue and often set
values more conservatively as a result.
You can obtain
comparable sales information online from real estate brokerage sites,
Realtor.com and multiple listing service (MLS) Web sites. These online
resources are a great starting place. The challenge is that they often
lack up-to-date sale and/or price-reduction data. The best source for
comparable sales information is a competent local broker who has access
to the most up-to-date MLS data.
2. Basing your list price on what you paid for the property
Many sellers believe that what they paid for the property influences
their current sales price. "We paid $200,000 for the property three
years ago. We have to sell it for at least $218,000 to break even."
This reasoning is based upon a very common fallacy. Many people believe
that the agents and the sellers determine the price at which a property
will sell.
The truth of the matter is that the real estate
market is like the stock market. The buyers -- not the sellers or
agents -- determine whether a property is saleable in any given market.
For example, if you paid $80 a share for IBM stock and today it's
selling for $50 a share, if you wanted to sell for $80 per share, you
wouldn't be a seller in today's market. The same is true for your real
estate. The price you paid for the property has no bearing on what the
buyer will pay. (It does make a difference in terms of your tax
liability and a host of other issues.) ...CONTINUED
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3. Overestimating the value of your improvements or upgrades
Many sellers have a challenge understanding how the improvements or
upgrades that they have made to the property impact value. Some
improvements do increase value. Generally these include adding square
footage or bringing your property up to the same standards as most
other properties in the area. Most improvements, however, make your
property more saleable, but they don't necessarily add to the value.
For
example, assume that you have white travertine marble countertops
throughout your home and distressed walnut floors. These features make
your home more attractive to potential buyers, but normally don't add
much to your sales price. The reason is that those improvements have no
value to a buyer who prefers dark granite and plush carpets. Also, if
you overimprove your property by making your home substantially larger
than that of your neighbors, you probably won't recoup that money
either.
4. Testing the market
Sellers often want to
"test" the market. "Let's list it at a higher price for a few weeks and
see what happens." This is a huge mistake. Real estate professionals
know that all listings have a "honeymoon period" where the listing will
have the most showings. This normally takes place during the first 30
days the property is on the market. The reason is that buyers who have
not yet found a property attempt to see new listings as soon as they
come on the market. This initial rush normally drops off after the
first 30 days. After that, showings are normally limited to new buyers
coming into the market. If you don't sell during the honeymoon period,
there's a high probability that your property will be on the market for
an extended period of time. You can generate additional interest with a
price reduction, but it never creates the attention you receive when
you first list the property.