Home is where the heart is, and it's also where the debts, headaches
and wealth can be. Small wonder, then, that selling a home is a loaded
and emotional experience. All too frequently, homesellers' opinions
of their properties are clouded by sentimentality. Every parent thinks
his or her children are extraordinarily gifted beings, and in a similar
way, most families believe their homes are worth a great deal more
than the average. It's only natural - couples remember the particular
spot in the living room where their firstborn took his first step,
or the outrageous bill they received after having the plumbing overhauled,
and they assume it all should show up in the sales price.
Regretfully, it doesn't work that way. In a booming real estate market,
in which fixer-uppers in up-and-coming neighborhoods receive multiple
bids above the asking price, an overpriced home isn't a deterrent
to buyers - it simply insures the seller will make a nice profit.
When the market declines, however, an irrationally priced property
is a guarantee that the home will languish on the market longer than
In a down market, the risk of an overpriced home isn't simply that
you won't get the asking price - there is also a risk of turning off
potential buyers and brokers, since an unreasonable price could stigmatize
the property. The first flurry of activity occurs in the first month
a property hits the market. After a home sits on the market for six
months or so, it could become a stale listing that gets filed in the
junk drawer of forgotten and overlooked properties.
Is The Price Right? Now that real estate markets around the country
are showing signs of sputtering, it becomes even more important that
a home is priced appropriately. In New York, one of the targeted "bubble"
real estate markets, prices per square foot in the third quarter basically
remained unchanged from the second quarter; and the price-per-room
declined 2.9 percent, according to the Corcoran Group, a Manhattan-based
real estate brokerage firm.
In markets where inventory is rising, even if prices aren't falling,
simply getting the home shown could be difficult if the price is too
high. George Ballantyne, a realtor with Sotheby's International Realty,
says that many of his clients have revised the prices on their homes
in recent months. "I have been encouraging many of my clients to put
the most competitive price forward to ensure the property will at
least be looked at," Ballantyne says. "Buyers have lots of choices,
and they don't have time to see everything. One important criteria
for looking at a home is its price." It isn't hard to imagine, however,
how a rational person can turn into a starry-eyed pipe dreamer when
it comes to selling a home.
After spending years in a home, and investing heavily in it, it doesn't
seem unreasonable to assume that all the care that has gone into a
home will increase its value. But veteran brokers say the biggest
mistake home sellers make is confusing the price or costs with property
value. "Just because I have a thing for platinum faucets and I spend
several thousand dollars on them, doesn't mean anyone else cares about
platinum faucets at all, nor does it mean that the house will sell
for $100,000 more than the house next door," says Jack Cotton, president
of Cotton Real Estate in Osterville, Mass., on Cape Cod. "Market value
is determined by how the home is valued by the market, not by one
individual. It has nothing to do with how much a seller paid for the
house; or how much he is hoping to profit from the house."
We asked a number of veteran brokers and appraisers the telltale
signs that a home is overvalued, and this is what they said.
1. Your home is priced well above neighboring properties. The first
thing brokers do before they recommend a price to a seller, is they
look at the sales prices of the last three sales of comparable-sized
homes in the neighborhood. You can conduct your own research to determine
a reasonable price before you hear estimates from brokers. Do a quick
search online to see what neighborhood homes are selling for, and
there are some tools that can help determine a roundabout value of
your home based on your zip code and other factors.
2. After a couple months, you still haven't received an offer. Don't
panic just yet. This isn't true for all homes, (it's not uncommon
for high-end homes, for example, to stay on the market for years)
but there should be a flurry of showings and interest in the first
four to six weeks the home is on the market if it's priced properly.
Although one assumes that overeager buyers are indicative that the
price is low, realtors say competitive bids are more likely indicative
of a reasonably priced home.
3. You spoke to several realtors before you hired the one who recommended
the highest price for your home. Realtors seldom want to take a property
that is overpriced, simply for the fact that the chances of selling
it are slim, and that means their chances of making a commission are
greatly reduced. Common sense is that you should speak with several
realtors before choosing one to represent you, but if you consistently
hear a ballpark price that seems low to you, the price may be right.
Realtors are (or should be) intimately familiar with most real estate
activities in their market, and they should have the best idea of
how a home should be priced.
4. There aren't any scheduled showings. Immediately after the home
hits the market, there should be at least a few appointments for showings.
If there aren't, it might indicate that local brokers think the home
is overpriced and therefore aren't showing it to their clients. Realtors
suggest that after a month, if there is very limited interest in the
home, it's not too late to reduce the price, but it's important to
act quickly in order to sustain some interest.
5. The home is priced for expensive, unique amenities that may not
hold broad appeal. Your family may have enjoyed endless hours of fun
in your indoor badminton court, but not everyone loves badminton as
much as your family does. The more customized the home's amenities,
the less likely the seller is to see their value in the sales price.