The Worst Home Selling Mistake
How This Slip-Up Cost a Home Seller Over Six Figures
Nobody sets out to make the worst home selling mistake, yet it happens. When you're wondering how much you can sell your home for, don't make this common home selling error. For starters, please know there's a great saying in the real estate business about this kind of selling mistake. To succeed in life, a person should strive to be:
- The First Child
- The Second Spouse
- The Third Realtor
And as with most sayings, there is some truth in that statement. Agents who pick up listings after sellers have made major mistakes, particularly about pricing, will attest.
But We Want More Money for Our House
When the average seller sits down to interview real estate agents, it's easy to get caught up in the excitement over choosing a sales price. More money means more financial opportunities for the homeowner. Perhaps it means the seller can afford to buy a more expensive home, help pay for her child's college education, or take that greatly overdue vacation. Unfortunately, uninformed sellers often choose the listing agent who suggests the highest list price, which is the absolute worst mistake a seller can make.
Is your agent correct when she suggests a price out of line with the expectations of other agents? That's the the $69 million-dollar question. She could be absolutely correct and all of the other agents are wrong. Or she could be wrong. Remember, 90 percent of the agents in the real estate business do not sell very many homes. Not as many as you might believe. There is a huge margin for error.
Establishing the Value of Your Home
The truth is it doesn't really matter how much money you think your home is worth. Nor does it matter what your agent thinks or 10 other agents just like her. The person whose opinion matters is the buyer who makes an offer. Pricing homes is part art and part science. It involves comparing similar properties, making adjustments for the differences among them, tracking market movements and taking stock of present inventory, all in an attempt to come up with a range of value, an educated opinion. This method is the same way an appraiser evaluates a home.
And no two appraisals are ever exactly the same; however, they are generally close to each other. In other words, there is no hard and fast price tag to slap on your home. It's only an educated guess and the market will dictate the price.
Is Your Home Sales Price Too Low?
Homes sell at a price a buyer is willing to pay and a seller is willing to accept. If a home is priced too low, priced under the competition, the seller should receive multiple offers to drive up the price to market value. So there is little danger in pricing a home too low. The danger lies in pricing it too high and selecting your agent solely on opinion of value.
How It Starts to Go Wrong When Overpriced
The seller of the Spanish home pictured on this page didn't even interview her real estate agents. She plucked the first one off the internet because, "He looked like such a nice guy." He priced her home at $1.3 million. This agent never heard the local agents chuckling behind his back because he worked in a different city. After 90 days, the listing expired.
Continues to Go Wrong, Still Overpriced
The next agent, also from another town, listed the home at $1.1 million. Months passed. Eventually the price dropped to just under $900,000. Still no takers. A few lookie-loos, but no serious buyers.
More Than a Year Later at the Right Price
By the time the last agent was hired to list this home, the seller had grown weary and exhausted. It was now 12 months later. Together, the seller and her agent priced the home at $695,000. It immediately sold for all cash. The sad part is the comparable sales in the neighborhood might have justified an earlier price of $835,000, but the home had been on the market for too long at the wrong price, and now the market had softened.
Agents Specialize in Expired Listings
There is an agent in my office whose basic real estate practice is composed of calling sellers of expired listings and relisting them at market value. He sits in a small room with a phone, desk and chair, dialing number after number. Last year he sold more than 34 homes valued at more than $13,600,000, and he has 18 active listings right now. He makes a pretty good living repackaging overpriced homes.
Protect Yourself When Pricing a Home and Picking an Agent
The question is how much money have those expired listings cost the sellers? The financial loss often exceeds the extra mortgage payments paid and goes beyond the uncompensated hassle factor of trying to keep a home spotless during showings. It affects the value that a buyer ultimately chooses to pay because it's not a fresh listing anymore. It's now stale, dated, a market-worn home that was overpriced for too long. Who wants such a thing?
Don't let it happen to you. Don't be that seller of an expired listing.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.