3 Common Mistakes Sellers Make When Setting the List Price

When selling their house, many sellers believe their best bet is to select a listing agent based on the one suggesting the highest list price, as though somehow that agent has magical powers to sell the home for more money than an agent who suggests a realistic list price. What sellers don't realize is that the list price is important only to the extent that it draws or repels potential home buyers. In actuality, proper positioning on the market and appraised value carry more weight in determining a property's actual selling price.
As a follow up to my last post - Price to Sell: 5 Listing Price Considerations to Keep in Mind - here's three common mistakes sellers make when they set the list price that you will want to be wary of.
Mistake #1: Basing a Sales Price on How Much the Seller Wants or Needs
It truly does not matter how much a seller thinks he or she needs to get for the home because sales prices are not based on sellers' needs nor desires. Sellers either conform to the market or they don't sell a home. Market value is dictated by how much a buyer is willing to pay and, if the buyer is relying on financing to complete the sale, how much the appraiser believes the home is worth. What agents hope for or the sellers want makes no difference in the real world.

Mistake #2: Expecting a Sales Price Based on the Neighbor's Listed Price

People tend to remember the price of a home when it was initially listed more so than the sales price
at closing. The sign goes in the yard, fingers fly to the keyboard, and there is your neighbor's home online in all of its glory priced way beyond anything you ever hoped to receive. However, the price the home is listed at and the price it eventually sells for can be very different.
In a strong seller's market, a the home might sell above list price. In a buyer's market, the home could sell below market value. There is also the condition of the home to consider, its upgrades or the lack thereof, deficiencies discovered during a home inspection - these are all things that can affect the final sales price. A neighbor can list a home for a bazillion dollars and, if it doesn't sell that price, that amount has no bearing on actual value.

Mistake #3: Basing a List Price on Average Square-Foot Costs

Although the total square footage of two homes could be identical, the cost-per-square-foot to build different styles of homes varies. Generally speaking, as an example, a 2200 square foot split level will be less expensive to build than a single-story home with that same square footage. Further, a smaller home would typically carry a higher cost-per-square-foot than a larger home since some of the big ticket items, such as kitchens and baths, would carry an equal expense. If all the homes in a neighborhood are two-stories, a seller may be able to guesstimate a value based on average square-foot costs, but the likelihood is that the home styles will vary. Square foot averages can only be a casual guideline.

How Real Estate Agents Estimate a Listed Price for Sellers

Sometimes a real estate agent will ask how much you want for your home or what other agents have suggested and then bump up his or her suggested list price to appear as a more attractive option to the seller. Do not choose an agent based on the highest sales price. Choose an agent based on integrity, knowledge, experience, negotiating skills, and the ability to sell your home without a lot of drama.
The important thing is to establish a price that will attract a buyer to view your home in person; it may or not be the price at which it will sell. Picking the right price should be based on 
  • the price of homes listed for sale that will be competing for your buyer, 
  • the price buyers have been willing to pay for comparable properties,
  • and market movement.
Nothing else matters. If the market does not meet the seller's expectations, a seller may want to wait until the market falls in line.

----- KIMBERLY VAN HAL | Good to Know® -----

Kimberly is a residential agent with Berkshire Hathaway HomeServices Premier Properties. Since 1987, she's helped home buyers and sellers in the Fargo-Moorhead metro area achieve their real estate goals.

701.306.9972