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Saturday, September 09, 2017
Don't Put Faith in These 7 Home-Pricing Myths
Pricing your own home is hard, what with all the
history and hopes this magic number entails. Of course, you want to make
a profit. Of course, all that money you spent installing a swimming
pool or a half-bath will be recouped, because you're leaving your digs
in better shape than when you bought it, right? Right?
not necessarily. Too many home sellers fall prey to myths about home
pricing that seem to make sense at first, but don't jibe with the
reality of real estate markets today. To make sure you haven't bought
into any of this malarkey—since the buyers you're trying to woo sure
haven't—here are some common pricing myths you'll want to rinse from
your brain so you kick off your home-selling venture with
realistic expectations. It's time to get real, folks!
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1. You always make money when you sell a home
Sure, 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. But selling your
home for more than you paid is by no means a given, and your return on
investment can vary greatly based on where you live.
The NAR also found, for instance, that the cost of single-family homes increased in about 87% of the metros it studied, but prices actually dropped in 23 markets. So don't assume you'll walk away with a profit until you've examined what's up in your area first.
2. Price your house high to make big bucks
know what you’re thinking: “Hey, it’s worth a shot!” But if you start
with some sky-high asking price, you'll soon come back to Earth when you
realize that an overpriced home just won't sell.
payday might sound appealing, you're actually sacrificing your best
marketing time in exchange for the remote possibility that someone will
overpay for your home,” says Kathleen Marks, a Realtor® with United Real Estate in Asheville, NC.
While certain buyers might be suckered in, this becomes far less likely if they're working with a buyer's agent who
will know all too well when a home is overpriced, and advise their
client to steer clear. And this can lead to problems down the road (as
our next myth indicates).
3. If your home's overpriced, it's no big deal to lower it later
but overpricing your home isn't easily fixed just by lowering it later
on. The reason: 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.
line: “Price your home appropriately from the beginning for your best
shot at having a quick and easy sale,” Marks recommends.
4. Pricing your home low means you won't make as much money
are often leery of pricing their home on the low end. But as
counterintuitive as this seems, this strategy can often pay off
big-time. Here's why: Low-priced homes drum up tons of interest, which
could result in a bidding war that could drive your home's price past your wildest dreams.
5. You can add the cost of any renovations you've made
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.
The reality: 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.
Check out this list of common renovations and their return on investment to know what you can actually expect.
6. A past appraisal will help you pinpoint the right price
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. It's not!
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.
“Since lenders know markets can change in
six months’ time, it's important for sellers to understand that a
previous appraisal is never a reliable source for the current value of a
home,” Marks says.
7. Your agent might overprice the house to make a bigger commission
Don’t even go there, says Realtor Raena Janes of RJHomes in Tucson, AZ.
“While it’s true that an agent’s commission
is based on the selling price of a house, the disparity will end up
being negligible,” she says. For example, the difference in commission
between a $300,000 house and one that's $310,000 is about $150.
“No real estate agent is going to lose a sale for the sake of a couple hundred dollars,” she explains.
Cathie Ericson is a journalist who writes about real estate, finance, and health. She lives in Portland, OR.