Pricing Myths Debunked
Unfortunately, there are several myths about pricing a home.
Every seller wants to sell their home for the best possible price – hopefully as quickly as possible. However, accomplishing these goals requires taking a specific approach to the home sales process that many owners are unaware of.
Without experience selling homes and understanding how the market works, it can be hard to get the desired results.
The following six myths are commonly accepted as truth among many homeowners.
You do not want to make the mistake of thinking these things are true because they aren’t. Belief in these myths plays a large part in why many sellers fail to get the most out of their home sales.
By believing these myths about pricing a home for sale, you are setting yourself up for failure.
As a Realtor with almost forty years experience, I will debunk the most common pricing myths. Following my advice will ensure you sell your property for the maximum price.
Far too many sellers don’t realize how improper house pricing can cause damaging effects. It prevents you from maximizing your sale price.
Getting your home priced accurately starts with picking a trustworthy real estate agent.
Keep in mind the best agents are usually the ones who don’t need a sale. You will get far better advice from someone who isn’t starving for money.
Real Estate agents who need to make a sale tend to think about their pocketbook first and not give the best possible advice.
I’ve written about things to expect from your listing agent when selling a home. The first item on the list is setting the correct list price!
Waiting For Longer Makes Better Offers Appear
It will come if you are willing to wait long enough and hold out for an excellent offer. This is a common assumption among many people. I probably have heard “we have all the time to wait things out” more than I care to in my real estate career.
The opposite of the above statement is how real estate sales usually work. The longer your home stays on the market, the worse the offers will get, or none at all.
As a home sits on the market week after week, buyers wonder what is wrong with it. Why has it taken so long to sell? Many buyers may spend months looking through listings so they can see your house when it first goes up, the next month, and then the next.
Eventually, they assume you are either pricing the home too high or something seriously wrong with the property.
Homes sell for the most money when they are on the market for less than 30 days in most markets. Pricing a house based on your needs or wants is a significant mistake.
Days on Market Matter!
The number one question all buyers ask their real estate agent is, “How long has the home been on the market.” Buyers ask this question for one reason – they want to know the likelihood a seller will negotiate and by how much.
Days on the market are crucial in getting the best price for your property. The longer a home sits, the less likely it will happen.
Right or wrong, the general assumption with most buyers is the longer a home is for sale, the more negotiating room there should be. This is why pricing a home correctly out of the gate is critical.
Time on the market is not a seller, friend! As the days on the market increase, history shows us that the gap between the listing and sale prices grows. The risks of overpricing a home are substantial.
Many sellers think they can drop the price later, and it won’t matter. It will matter! If you overprice your home, the odds dramatically increase that you’ll sell it for less than you would have if priced correctly on day one.
Quick Offers Means The Home is Priced Too Low
Many naive sellers believe A quick offer indicates that you priced the house too low. This statement is one of the more common pricing myths among sellers.
A quick show of hands by all the real estate agents reading would tell you they have heard many times from sellers that “they gave their home away” because it sold quickly. This is 100 percent false.
When your home is listed on the market, it will be seen by multiple buyers. Depending on the area, hundreds or even thousands of shoppers could at least skim your listing as they filter through all the possible homes they could buy.
If you have priced your home right, many of these buyers will be interested in it immediately. These buyers may have been shopping for weeks or months, looking for a home like yours at a competitive price point.
With the right price in the right market, you could get multiple offers in a short amount of time. This is especially true when a limited number of homes are available to purchase.
Getting multiple offers is good, as it creates bidding wars on houses.
Inventory levels will often dictate how quickly a home receives an offer.
You want offers on your home – from multiple buyers if possible. With multiple offers, you can encourage buyer competition and hopefully get more for your home.
You do not want to price your home lower than it is worth, but you want to price it low enough to attract buyers and make offers. Hopefully, the contract will come right after your Realtor puts up the listing!
The key is finding a real estate agent you can trust who can price a home for sale without leaving money on the table!
Unique Marketing Brings Higher Prices
If your home is marketed correctly, it will fetch a higher price. This is a 100 percent true statement, but that doesn’t mean that outside-of-the-box or crazy marketing ideas make homes sell for more.
Have you ever encountered the proper intentions of some sellers who think they know more about good real estate marketing than you? I know I have! Have you ever heard something like this: “Bill, do you believe we could run an ad in the NY Times this weekend?” The internet doesn’t seem to be cutting it.
Of course, the internet isn’t cutting it because your home is priced $20,000 higher than it should be! The internet does not sell overpriced homes, nor will an ad in the NY Times!
The market value of your home has nothing to do with outside-the-box real estate marketing. Marketing is all about visibility and attracting the right kind of buyer. With an efficient marketing plan, your home listing will find its way in front of thousands of well-qualified buyers.
Good marketing will display your home’s best qualities and encourage potential buyers to look further into the listing and schedule a viewing. But marketing does not change the value of your home.
If your home is overpriced, the best marketing in the world won’t cure that. There are many things sellers need to know. Correct pricing is at the top of the list.
We Need The Right Buyer
“We just need to find the right buyer to sell our home for a great price.” Another misconception regarding the sale of a home is that if you wait long enough, the right buyer will appear on your doorstep.
That would be like me saying if I wait long enough, I’ll be dating multiple supermodels simultaneously. Fat chance!
This myth is similar to #1, but the emphasis is on the individuals considering your home instead of time.
But just like more time will not encourage higher offers, finding the one-in-a-thousand buyer who will overlook the advice of their Realtor and ignore the realities of the market is extremely unlikely.
Buyers do not tend to break very far from the group, and for good reason. The market is what it is because of the supply and demand of all the available houses, possible buyers, and transactions.
For a purchaser to go far outside of the norm and buy a home for far above market value is unusual because it is not a sound financial decision.
Another thing to consider about holding out for an individual buyer is that the only kind of buyer that can buy a home that is priced far too high is a cash buyer.
Lenders verify the market value of every home they lend money ensuring that the bank’s interests are protected financially.
Even if a buyer is foolish enough to try to buy an overpriced house, there is a high chance that the lender will deny the loan due to the price. This will be due to a low appraisal value on the property.
We Need to Price Our Home With More Negotiating Room
Needing to price a house with a significant “negotiating room” is a pervasive pricing myth among sellers.
Negotiation is an essential part of the sales process; there is no denying that. Your Realtor should be prepared to negotiate to help you get what you want out of the sale and keep you from being taken advantage of. However, pricing a home excessively high is unnecessary to create an opportunity to negotiate and reach a middle ground.
Yes, you can expect buyers to occasionally make an offer below your original price. This will be especially true in a buyer’s market. Buyers will expect to have to negotiate up. But the negotiating room does not have to be substantial.
Negotiating will be less likely in a robust seller’s market.
Trying to price to create a lot of negotiating room will result in you never getting the chance to settle in the first place. When a home is priced too high, it will be avoided by buyers and their agents. They will all wait for the price to go down to something reasonable.
If you wait too long, you will encounter buyers who think something is wrong with your house.
Talk to your real estate agent about pricing your home and what will happen with negotiations. Your Realtor can help you understand what price will be competitive for your home and will help you decide on the minimum offer you will accept. Then, your agent will list the house slightly higher than your lowest acceptable offer.
Zillow Says It’s Worth More
“The value you have come up with for my home can’t possibly be right because Zillow thinks it’s worth X.” Your mom thinks you are the best-looking man or woman in town, too.
Let us get one thing straight – you have better odds of seeing Bigfoot than an accurate Zillow value on your home.
The fact of the matter is Zillow’s values are all over the board. I have seen homes as much as $150,000, both over and under the actual value.
So when someone asks me whether a Zillow home value is accurate, the look on my face is usually one of disgust.
If you have been drinking the Zillow Kool-Aid, you need to stop. In the article above, you will see a comprehensive explanation of why a “Zillow estimate of value” is not something you should consider helpful.
While Zillow has an excellent site for looking at homes and other data points, its Zestimate is its weak spot. Surprisingly, they have kept this feature with all the backlash they have received from both real estate appraisers and agents alike.
There are no online home value estimators that can accurately predict the value of homes.
When you need to determine the value of your home, it is essential to have a seasoned pro. That could be an appraiser or a Realtor with exceptional pricing skills. It’s not an algorithm that doesn’t know your individual property.
This is one real estate pricing myth worth dumping fast!
Your Assessed Value is NOT Your Market Value
Another myth that some sellers believe is that a home’s assessed value has anything to do with market value.
This is among the many ways sellers end up overpricing their homes. What’s funny about this myth is that only those with a higher assessed value than the actual value believe it.
Rarely do you ever hear a seller questioning the value when the assessed value is super low? The town’s value is nothing more than a measuring stick for a community to collect the tax assessment needed to function correctly.
Final Thoughts
Pricing a home properly is a skill and an art. The price is also the most important consideration for getting your home sold. If you get the price wrong, nothing else you or your agent do will matter.
Setting the right price is 75% of the marketing for your home. The correct price attracts the right buyers. So, how do you know your home is overpriced? I’m glad you asked! In the article, you will see ten tell-tale signs your home is not priced as it should be.
About the Author: Bill Gassett, a nationally recognized leader in his field, provided information on myths about pricing a home. He is an expert in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications he has been featured in. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 38+ years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
Thanks for the tips. I have been looking at selling my first home and moving back to the city. I miss the noise and movement of city life. I was thinking of putting the price of my home high to see if that would help with a little bit of wiggle room. I had never thought how that could limit my perspective buyers. I will have to talk to my agent about this.
This advice on home pricing is great. This will come in handy as I try and sell my house for what it’s value is. Thank you!
I always thought that a fast selling home was one priced too low, so thank you for setting me straight. I like how you point out that it most likely means that the house was priced correctly. I can see it would be helpful to have a real estate agent who understands pricing help you decide on the listing price. Thanks for explaining all these things!
My grandparents have been thinking about moving to be closer to our family since they live out of state. Consequently, our family discussions have centered around how much they think they can get for their house and what they should list it at. It’s ironic that you mentioned Zillow’s pricing because that was one of the first places we looked when deciding on a potential listing price. We will have to re consider our decision in drinking the Zillow Kool-Aid. I wonder if there are other reliable sources similar to Zillow when trying to find a good starting point for prices when putting your home for sale.
Kate – the best thing to do is speak with one of the best real estate professionals in your area. Look for someone who has a consistent track record of pricing a home correctly from the first day it goes on the market. Skip all the pricing myths and I am sure you will be just fine!
You can say that pricing a house is an art! You can use a different strategy in pricing your house, but you may end up listing it for a long time. It’s better to seek professional advice on this to avoid going down the pit.
Having a trusted agent is a big thing and you must do your own research too. Knowing more about your own home is important. Sometimes you need a bit of luck in finding the right person to buy your house. If they really like your house they will buy it in the right price.
Great information Bill (as usual)
Really something we could put into our listing presentations!!