The process of buying and selling homes is somewhat mysterious to many Americans – especially first-timers.
To make matters worse, friends and family, as soon as they learn you’ll be involved in the process, tend to offer their advice. This is how myths are formed – by people making assumptions about how something works.
Let’s see if we can debunk some of the most common home selling myths that real estate agents face every day.
Myth: The seller determines the home’s value
Fact: Buyers determine the value of a home and their opinions are reflected in the prices of sold homes in the area.
The International Society of Appraisers quotes the Department of the Treasury’s fair market value definition as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of relevant facts.”
Buyers base their willingness to buy on several factors, including the size and condition of the home, its location, current market conditions and the sales prices of comparable homes.
The list prices of area homes merely reflect what the sellers are hoping to get. Don’t assume that the $375,000 list price of the house next door represents market value in the neighborhood.
Recent sale prices are indicative of what buyers are willing to pay and, thus, market value.
Myth: To leave room for negotiation, it’s smart to price the home high in the beginning.
Fact: Overpriced homes take longer to sell and typically sell under market value.
There are several reasons why this happens. First, by overpricing the home you are excluding your real buying pool. Buyers who can afford to pay what your home is truly worth won’t bother looking at it, because it’s not priced in their range.
The house will attract buyers that can afford to pay more for a home and yours simply won’t stack up to the others in the price range. By alienating both pools of buyers you are wasting those valuable first two weeks of marketing when your home is a new listing.
Overpricing the home is only a safe strategy in a seller’s market, when there are few homes available and lots of buyers in the market. In a buyer’s market, however, your overpriced home will languish on the market.
Myth: There’s no need to make repairs if you are giving the buyer a repair credit.
Fact: Today’s homebuyers want a home that is in move-in condition.
Can you blame them? Few homebuyers want to move into a house knowing that they will be inconvenienced by ongoing repair work. Which is why the majority say they want a home in move-in condition.
To sell the home quickly and for top dollar, make major repairs before you put the home on the market. Not only will the home then be considered move-in ready, your agent can mention the repairs in the home’s marketing materials.
Myth: Home improvements pay for themselves when you sell.
Fact: Few home improvement projects return 100 percent of your investment, according to Remodeling magazine’s annual Remodeling Cost vs. Value Report.
If the home is a fixer, and you do major renovations, you will get a higher price for it than you would if you didn’t do the work. It is doubtful, however, that you’ll make all your money back.
Replacing the garage door is the closest you’ll get to recouping all the money spent – a 93.3% percent return on investment.
Make improvements to the home based on how they will increase your comfort and your enjoyment of the home.
Myth: Choose the real estate agent that recommends the highest list price.
Fact: An agent that recommends a price substantially higher than what other agents recommend may be trying to “buy” your business.
It’s an old trick and, while not many agents engage in the practice, some do. You’ve already learned about the dangers of overpricing your home and this scheme takes it one step beyond. After 30 days or so, the agent will come to you and ask for a price reduction.
By this time, the home has lost valuable marketing time and now, with a price drop, it may become stigmatized. Buyers will wonder what is wrong with the home that has caused it to sit on the market. The price drop invites bargain shoppers, hoping to cash in on your perceived desperation.
Choosing a listing agent is one of the most important steps in the home selling process. Choose your agent based on experience and credentials, not on lofty promises.