Your Home: Selling your home 3 times

It does not take long for the news of a hot seller’s market to get around. And one of the by-products is overpricing. Oftentimes sellers are misinformed that they can start their home at a fantasyland price and if it does not receive any offers, they can simply adjust the price down to make the home more marketable. This is risky advice to say the least. You are only new once, and a seller loses a tremendous amount of leverage by choosing to be overpriced while you are new to the market.

Most importantly, pricing must be rooted in reality. Meaning, there must be evidence to support a list price when the goal is to generate offers.

When I am interviewing a potential new client for the first time and we are discussing price, I will always share with them that you must sell your home three times. Not just once. There are three parties who must be convinced of the contract sales price and they are as follows:

1. The buyer. First and foremost the buyer must feel confident that a home is a good value before they will make an offer. The buyer will compare it to other homes that they have toured during their search. They will also review comparable properties that have sold in the area or are currently under contract. This information will be provided to them by their agent. In some cases, the buyer will also seek counsel from family members or friends to help validate their decision.

2. The buyer’s agent. Regardless of how enamored a buyer may be with a home, it is their Realtor’s job to provide them with all of the information that the buyer needs to make an educated decision. In many cases, the buyer will depend upon his or her Realtor to leverage their experience in the market to provide perspective to a buyer. After all, that is why they hired their Realtor to begin with. As a Realtor, we have a fiduciary obligation to our client which means that we act solely in the buyer’s best interest. If the buyer is looking to make a questionable investment in an overpriced home or a home that exposes them to other risks, it is the Realtor’s job to inform them of their concerns and ensure that their client is aware of all of the risks.

3. The appraiser. The final say when it comes to supporting a contract sales price is the appraiser who works for the buyer’s lender. The appraiser is there not to protect the buyer, but to protect the lender. Their job is to prove that the contract sales price can be supported by actual market data. Unlike the first two (the buyer and their agent), an appraiser is not concerned about how much the buyer loves the home, or how long they have been looking, or how many homes that this buyer may have missed out on already in multiple offer situations. The appraiser’s job is to evaluate the property, compare it to other sold properties in the area, and ulitimately determine that if the buyer were to default on their loan for some reason that the lender would get their money back if it were foreclosed upon. Appraisers are under tremendous scrutiny these days. Their appraisals cannot be full of fluff. If so, the appraiser can be penalized. And appraisers work in the market of the recent past. Because they count on sold-property data rather than analyzing inventory levels, they do not give value to homes that are in back-up or pending status. So in an improving market where homes are appreciating quickly, the appraisal may not support a contract sales price that is pushing value.

A common misconception is that you can get sloppy with pricing in a strong seller’s market. Nothing could be further from the truth. Strategic pricing is required in all markets. A seller who recognizes this fact will be the most successful when it comes to low days on market and achieving top market value. And remember, your price has to convince three buyers that your home is a fair value.

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