Determining the price for which to list your beloved home is a challenge, particularly with all the history, memories, efforts in maintaining, investments in any upgrades, and hopes for profit. There are also some myths about home pricing that could get in the way of the task at hand and ultimately affect the timeliness and profit of your transaction.  Besides always consulting your real estate agent on price strategy before listing, sellers should understand the pricing myths as well. Here are a few myths that are important to expose, so that they don’t pose additional hurdles in getting a home on the market for a realistic and fair market price.  

 

It is an overwhelmingly common belief that everyone will make some kind of money when a home is sold. Though real estate does tend to appreciate over time (the National Association of REALTORS® (NAR) estimates that home prices will have increased by 5 percent by the end of 2017 and will continue rising an estimated 3.5 percent in 2018), selling a home for more than what was paid is not always guaranteed, and the return on investment can vary a great deal based on many factors. NAR also reports, for example, that the cost of single-family home rose in approximately 87 percent of the metro areas researched, but prices dipped for 23 other markets, so it is important to take the area the home is located in when trying to determine what kind of profit can be made from the sale of the home. 

 

In Southwest Florida, there have been many overpriced homes that have sat on the market for months over the last year, which brings in the next myth. Another common belief that is not necessarily a fact, is that pricing a home high will better guarantee a larger profit is made. The problem with this is that pricing a home extremely high will actually more often guarantee that a home will stay on the market versus selling at all, as sellers of overpriced properties will spend their time chasing the market as opposed to receiving offers. The best marketing window of time is when your home first goes on the market. Pricing it extremely high and taking the risk that many potential buyers will not be willing to overpay for the home is a deterrent, which is simultaneously wasting precious marketing time. eWhile some buyers may bite, if they are working with a buyer’s agent, the agent will know that the home is overpriced and advise them to avoid the home. 

 

Another myth that is directly linked to this one, is that if a home is listed over price it is no big deal to lower the price and relist later on. The issue with this is that homes that sit on the market for a while and show a price reduction or multiple price reductions, give the signal to potential buyers that there may be something wrong with the home – another deterrent. For all of the aforementioned reasons, it is important to carefully and fairly price a home from the start, to give the best attempt of having a quick and stress-free sale. 

 

On the opposite end of pricing a home over market price, is the myth that pricing a home on the low end of market value will not result in profit. However, this strategy has often paid off, as homes that are priced low seem to create interest quickly and could potentially result in a bidding war between potential buyers who have all fallen in love with the home. 

 

Renovations and remodel projects are another topic that has to be addressed and appropriately weighed when pricing a home. Many homeowners pour time, money and efforts into remodeling a kitchen, installing a deck, or completing other renovation projects on their home and firmly believe that the money paid for the improvements will be earned back at the time of sale. The truth is that while some renovation projects will absolutely result in return on investment upon sale, the average percentage of what is spent that can be expected to be recouped up on sale is approximately 64 percent. 

 

Another common misnomer is that old appraisals can be used again. A homeowner may have refinanced the home at some point or may have the appraisal from when the home was purchased, but an appraisal is an evaluation of the homes value based on current market conditions, so it is outdated quickly. Lenders will rarely accept an appraisal that is over 60 days old. The market can change drastically in six months as well, so an old appraisal is not a reliable calculation of the home’s present value. 

 

With all of these myths out of the way, here are some tips for pricing a home to encourage solid offers from serious buyers:

 

•          Take the focus off of what was paid for the home to begin with and stay in the now

•          Use all the tools available, including comps, AVMS and the help of an experienced local REALTOR®

•          Consider upgrades but be realistic about the expected return on investment, based on current market appeal; a REALTOR® can help assess return on investment.

•          Leave some room for negotiation

 

Putting a price on a home can be tricky. It has both personal and financial value. Shooting too high or too low could both have consequences, so better to weigh all features, market indicators, and options carefully, and rely on the assistance of an experienced REALTOR® to get it right from the start.