Ryan has been running a fantastic real estate blog for years and has double the audience that we have here, so check him out here.
He gave me permission to run his latest post, and #1 is true – once sellers tell all their friends and family that they are selling, it’s like the list price becomes a fact, rather than a hopeful target: Overpricing is a problem. You’d think in such a “hot” market that it wouldn’t be an issue, but it is. I’m not trying to dog sellers, but let’s talk about some of the most common pricing mistakes right now. I hope this helps.
1) Getting married to the list price: Sometimes it’s like sellers get married to a lofty list price and become unwilling to budge – even when buyers are refusing to pay that much. It’s as if sellers get paralyzed and cannot move beyond a clearly unrealistic price. My advice? Listen to the market and budge on price as needed.
2) I need this amount to move: I’ve encountered a few sellers recently who priced based on how much money they needed to move. But the market doesn’t care about personal finances or plans. The market only cares about paying a reasonable price for the property.
3) Headlines: At times sellers hear sensational headlines like, “Values are increasing more rapidly than ever,” so they price according to a headline rather than similar sales in the neighborhood market.
4) Out of touch with picky buyers: Buyers these days tend to be pickier than ever about what they purchase, but I’m not sure sellers are really in tune with how finicky buyers are about price, location, and condition. You’d think buyers would be so desperate to get into a contract and pay anything because of a housing shortage, but they’re actually quite patient in many cases because they want to wait for the right property and feel like they’re paying a fair price. My advice? Price for real buyers in the neighborhood market rather than that one mythical “unicorn” buyer who is going to pay more for some reason.
5) Sales instead of comps: The most common pricing mistake I see is pricing according to a sale down the street that really isn’t comparable. So a seller says, “I know that house is totally remodeled with a pool, but someone’s going to pay the same amount for my house.” My advice? Price according to similar homes that are actually getting into contract rather than dissimilar properties. Be careful about hijacking price per sq ft figures too.
6) The fallacy of summer: We hear that summer is the hottest real estate season, but the spring season is actually the hottest in many markets throughout the country. By the time summer rolls around the market is actually beginning to cool because it’s been hot for almost two quarters already. During summer listing volume is just about to peak for the year, and that means it starts to take longer to sell, prices often begin to soften for the season, and buyers gain more power to negotiate. My advice? Be realistic about prices today.
7) Zillow: I can’t tell you how often I’ve heard, “But Zillow says my house is worth X amount.” I know, Zillow says stuff like, “We’re only a starting point and a ballpark figure.” Yet in my experience sellers rely heavily on the Zestimate and very often treat it like a definitive ending point rather than a ballpark. Remember, Zillow doesn’t know anything about the condition, upgrades, smell, etc… Sometimes Zillow nails the value, but other times it’s off by a substantial amount – even in a tract neighborhood. My advice? Take “The Big Z” with a grain of salt.
8) Other: What else are you seeing out there?
I hope this was interesting or helpful. In light of the market beginning to cool for the season, I thought scratching out these thoughts might be helpful and even save sellers some money (and heartache).
Questions: Which mistake do you see most often? Any stories or insight to share? I’d love to hear your take.
Hat tip to Ben who alerted me to this post!