THIS ARTICLE FIRST APPEARED ON HOUSE LOGIC.
This is the time for cold, hard data — not emotion.
You don’t need to be Bob Barker to know when the price just isn’t right. Just ask Candace Talmadge. She originally listed her Lancaster, Texas, home for $129,000, but “eventually had to accept the market reality” and chop $4,000 off the price.
The home’s location proved challenging: Buyers were either turned off by the area — a lower-income neighborhood south of Dallas — or unable to afford the home.
“Sellers have to keep in mind the location,” says Talmadge. “Who are going to be the likely buyers?”
Home pricing is more of a science than an art, but many homeowners price with their heartstrings instead of cold, hard data. Here’s why crunching the numbers is always the better route to an accurate home price — as well as what can happen when home sellers overlook those all important data points.
The Pitfalls of Overpricing
Homeowners often think that it’s OK to overprice at first, because — who knows? — maybe you’ll just get what you’re asking for. Although you can certainly lower an inflated price later, you’ll sacrifice a lot in the process. The most obvious damage: A house that remains on the market for months can prevent you from moving into your dream home. Already purchased that next home? You might saddle yourself with two mortgages.
“You lose a lot of time and money if you don’t price it right,” says Norma Newgent, an agent with Area Pro Realty in Tampa, Fla.
And worse: Continually lowering the price could turn off potential buyers who might start wondering just what is wrong with your home.
“Buyers are smart and educated,” says Lisa Hjorten of Marketplace Sotheby’s International Realty in Redmond, Wash. “You’re probably going to lose them.”
The Pricing Traps
It’s easy for homeowners to stumble into two common traps:
- Conflating actual value with sentimental value — how much they assume their home’s worth because they lived there and loved the time they spent there.
- Assuming renovations should result in a dollar-for-dollar increase in the selling price — or more.
“Many homeowners think, ‘Of course my home is worth a bazillion dollars,’” says Newgent. If they put in a few thousand dollars worth of new flooring, for example, they might overestimate the upgrade’s impact on the home’s value into the tens of thousands.
Talmadge’s Texas home came with a built-in renovation trap: It was already the nicest home in the area, making it harder to sell. Major additions had inflated the square footage — and the price, according to one appraiser — without accounting for the surrounding neighborhood. That created a disconnect for buyers: Wealthier ones who might be interested in the upgraded home disliked the neighborhood, and less affluent buyers couldn’t afford the asking price.
“Don’t buy the nicest home on the block” is common real estate advice for this reason.
That’s not to say that renovations aren’t worth it. You want to enjoy your home while you’re in it, right? Smart renovations make your home more comfortable and functional but should typically reflect the neighborhood. A REALTOR® can help you understand what certain upgrades can recoup when you sell and which appeal to buyers.