Debunking myths around your asking price
I am going to put my home on the market for sale. The real estate agent has given me a price, but I think it's too low, surely it can't hurt to price it higher and leave room for negotiation?
When homeowners are preparing to put their properties on the market, one aspect is usually foremost in their minds: money. Setting the asking price accurately can mean the difference between getting an offer quickly and having a house languish for months, drawing little interest. With that in mind, it's important that potential sellers block out a lot of the noise that often surrounds the intricate art and science of pricing. There are plenty of myths that may cause sellers to lose sleep at night as they attempt to separate fact from fiction.
The following are statements that can stand in the way of a successful sale:
1, If we keep waiting, a better offer will come along
When sellers receive an offer from the first showing, they may be sceptical or hesitant to accept it, wondering if other prospective buyers would be inclined to pay more. Thoughts of potential bidding wars could cause sellers to want to wait and see who else falls for their place. However, currently we are in a buyer's market, so it is worth remembering the adage: a bird in the hand is worth two in the bush. There's no guarantee other would-be buyers are waiting around the corner. If the offer is a fair one, entertain it and count your blessings. The chances are these buyers have been looking for a while, have a good idea of property value, and know one that is priced correctly when they see it.
2, Getting an offer right away, means the agent priced it too low
When sellers receive an offer early in the process — as excited as they might be — many can't help but wonder if they should have asked for more money. While it's natural to be sceptical (and even a little greedy), receiving an offer on the early end of the spectrum most likely means your home was priced accurately and attractively. If you trust your agent, you know he or she didn't pick a number out of the sky, but rather based it on extensive market research. So be glad your sale is moving in the right direction.
3, We should price it so there's room to negotiate
This one is used frequently. Every seller would love to get top dollar for their homes and our aim is to help them do that, but overpricing it with the intention of being willing to accept a lower offer may just leave you empty-handed in the long run. Whilst it might be OK to allow a small percentage of negotiation space — between 3 per cent and 6 per cent on a home valued at under $1 million — it is not OK to add an extra $100,000 or $200,000.
If you do this the people who initially look at it won't buy it as they are expecting something better for that price. The people who would buy it, don't even consider it because when they do an online search, it doesn't come up as being in their price bracket. Plus, if you have to drop your asking price multiple times, buyers may begin to wonder what's wrong with the place.
4, That's not what my friends say it's worth
How many of those friends are out in the good old real estate field, day in day out? Probably not many. Have you ever noticed how homeowners are eager to believe anyone who suggests a price that exceeds their expectations? Yet, when the opposite happens, they assume it's outdated or erroneous information. The point we're making is, these numbers can be inaccurate so again, trust your agent over your friends. Enough said. However, if in any doubt, get an independent appraisal done. This will cost you several hundred dollars but it will save you hours and hours of wasted time.
5, Another agent said it was worth more
The truth is, all agents are in the same market and in Bermuda that's quite a small one. Can one agent get you more money than another one? It depends. House prices are driven by the amount that buyers are prepared to pay for them, and they arrive at this value through comparing it to other similar properties that have recently sold. Where a good agent can really make a difference is in the marketing. So rather than get too hung up on the price, ask your agent to show you how they intend to market your property. The agent who can provide a solid marketing plan that will put your property in front of as many qualified buyers as possible, is the one who will ultimately get you the best price.
5, We can add all renovation costs to the asking price
Sellers may adore the improvements and renovations they've made and want to add those costs to the asking price but remember, not every change is going to land a huge return on investment. Sometimes, what you think is a renovation is actually just general maintenance. If you're curious about what you can expect on those fixes, chat with your agent, who will advise you which renovations carry the highest return on investment.
6, The realtor overpriced my house to make a larger commission
Agents are paid a percentage of the selling price of the home. Most agents work only on commission so they do not get paid until a house sells. They may suggest a higher list price to appease you so they can get the listing, but believe me they know the market. Most agents are certainly not going to suggest a price way out of line with market value because they know the house won't sell and if it doesn't sell, guess what? They don't get paid anything. It's hard to imagine an agent would blow a potential sale and take on weeks or months of additional showings and marketing expenses for a few hundred dollars' commission.
7, Reducing the price is a sign of weakness
If time is passing and there's been little interest, if you have no offers and few viewings, it is probably time to consider lowering the asking price. Remember, time is money. While you're waiting for someone to meet your price, you're still paying the mortgage, taxes, utilities and insurance.
Plus, sometimes, lowering the price can put your home in front of a group of new buyers, which could generate a lot more interest and, ultimately, get the price closer to where it was in the first place.
• Heather Chilvers is among Coldwell Banker Bermuda Realty's leading sales representatives. She has been working in real estate for 28 years. If you have a question for Heather, please contact her at firstname.lastname@example.org or 332-1793. All questions will be treated in confidence. Read this article on Facebook: Ask Heather Real Estate