Two Reasons FSBO’s Price Incorrectly
Pricing your home correctly is what the National Association of Realtors says is most difficult for For Sale By Owner “FSBO” sellers.
Pricing items in general is not always easy, but pricing a home is the absolute hardest. Obviously, every market is different when it comes to pricing your home. For example, if you compared apples to apples of homes across the country you would see the same home with the exact same features sell for different prices depending on where it is located. So that means that you have to scale down to individual market trends to get a better price point.
When you want to engage in pricing your home in your market, there are two factors that make it hard for home owners to do it themselves:
INDUSTRY PRICING KNOWLEDGE
If you need a pair of shoes, what are you willing to pay? You probably have a good idea of what shoes should, and do cost. However, when it comes to pricing your home correctly, do you know what features in your home are worth? Do you know what the public is willing to pay for the size, location, age, etc? In any sale, the entire transaction process HINGES on what the buying public is willing to pay. Understanding market trends, transaction histories and what features push and pull real estate transactions up and down is very important. That type of information is not easy for the general public to get, mainly because they don’t operate in the field, understand the verbiage and don’t pay for the access that is required within Real Estate.
Real State Agents help with this because they have access to that kind of information easier than the general public. They have gone to school, been tested and pay annual fees for access to tools they use. They also use these tools regularly which helps them grow in knowledge. Before you argue otherwise, it is very hard to get an accurate assessment of that type of information from websites like Zillow.com or Realtor.com. Again, if it were, I would not be a Real Estate Agent.
Let’s use the shoes example. You want to sell a pair of shoes. What do buyers typically pay for shoes with no laces? Do buyers typically pay for shoes with laces? What do they pay for shoes that have only been worn a few times? How many buyers are out there looking for your type of shoe for sale? This information helps you decide on how to price your shoes. Here’s another factor: Your shoes are men’s size 10. This automatically means that you cannot sell your shoes to anyone who doesn’t have that size foot. At least it is going to be an outlier to sell your shoes to someone who isn’t that size.
Real estate agents are able to be impartial and to give facts and explain what the market trends are doing and establish the reality of what people are paying for similar type homes with different types of features. If homes in the local market that features three bedrooms and two full bathrooms and are similar square feet in size for $150,000, then you can’t expect the exact style home to be sold for $175,000.
Different features are worth different amounts. Here in Lincoln, NE, “walk-out basements” are worth a lot more. That means there is a door in the basement that lets you go outside. Granite countertops rather than laminate counter tops are worth more. But how much more? How many homes have sold in the last 6 months with similar features? These are critical industry questions that need answers when pricing your home.
This might be an even bigger factor than industry knowledge. When you start pricing your home, from the very beginning, you MUST be able to realize that your home is no longer your home. It is now a PRODUCT. Before you’re going to deal with pricing your home, you must realize that you are offering a product for sale. You are no longer offering your home for sale. You see, the buying public doesn’t want your home. The buying public wants to buy your product and then make it their home.
Believe me, I get it. I recently sold my home that I had put 18 months of blood, sweat and tears into (not to mention $60k) and I had to realize that not every feature I invested in was going to be desired by a new buyer. Some of our updates were fundamental needs such as a backyard deck and fixing a leaking shower and other miscellaneous general home improvements. However, a lot of our upgrades to the home were personal preferences and I had to realize that while I valued them, a prospective buyer might not.
A great example of a personal preference would be the color of the paint on all of your walls. You might think that the wall color in your house is perfect. What you might fail to realize is that the buyer of your home may very well buy your home and the very next day hire a painter to repaint everything. I know it hurts and you can’t imagine how a different color would work in the living room, but you must. People have different preferences and are not willing to pay more just because you “love it”.
Homeowners must separate their emotional self from the house in order to turn it into a product for sale.
If you can do that, then you can make an objective judgment call on what your home is worth when you begin pricing your home.
It’s important to value your product without any emotion. Also, it’s best not to fictionalize a buyers reason for buying your product. Going back to the shoes example: You can’t sit in your house and look at your size 10 pair shoes saying to yourself, “These are so amazing why wouldn’t someone with a size 7 or 8 foot want to buy these?” So silly, right? What is amazing is how many people do this with their own home. They look at all of their features and things that they love or improvements (according to them) that they have paid for along the way and they can’t imagine why anyone wouldn’t feel the exact same as they do about their home.
You have to be unattached and view the house as a product, not a home. Can you do that? If not, good Real Estate agents help you do that.