Let’s mix things up — instead of sharing how pricing in real estate happens, let’s chat about a few misconceptions and what does not matter.
1. Original purchase price. The amount the seller originally paid for the home is irrelevant to its current market value. The market value is determined by current market conditions, not historical purchase prices. The best option for pricing is to have a REALTOR® provide a market analysis to determine if you have gained enough equity from when the property was originally purchased.
2. Seller’s emotional attachment. Sellers should be met with grace for the life changes surrounding the purchase or sale of a home. Yet, the personal value or emotional attachment a seller has to his or her home does not impact its market value. Objective criteria and maybe the emotion impacts a buyer’s offer. The best option for keeping emotional attachment out of the transaction is to find a trusted REALTOR® who will understand a seller’s emotions while providing data on the best way to accomplish the seller’s goal.
3. Cost of improvements. While certain improvements can add value, the total cost spent on renovations and upgrades does not directly translate into an equivalent increase in market value. Some improvements may have little to no return on investment. The best option for investing wisely in improvements which will provide optimum return on investment is to contact a REALTOR® prior to an effective game plan.
4. Unpaid mortgage balance. The amount remaining on the seller’s mortgage does not affect the home’s market value. The home’s worth is determined by comparable sales and market conditions, not the seller’s financial obligations. The best option when discussing the financials is to alert the selected REALTOR® to any outstanding debt attached to the property to properly prepare the seller for the estimated net proceeds.
5. The price of a different property. The price of another home that the seller is planning to buy or has bought does not influence the market value of the home being sold. Each property’s value is based on its own merits and local market factors. The best option is to reach out to a REALTOR® as early as possible to strategize on how to buy and purchase smoothly or to connect the seller with a referral REALTOR® if the purchase is out of his or her area of expertise.
6. Personal investment needs. One of the questions we discuss during the listing presentation is “What do you believe your home is worth?” and “What would you like to net?” This is always a helpful perspective, yet a seller’s need to achieve a specific financial goal from the sale of the home does not impact its market value. Buyers are not concerned with the seller’s financial goals. They submit offers based on data and what they believe the home is worth.
7. The need for quick sale. The seller’s urgency to sell quickly does not change the home’s intrinsic market value. While it might lead to a lower selling price, it doesn’t affect the actual market value determined by comparable sales. The best option is to discuss pricing in relation to your desired settlement date and price accordingly.
I hope you noticed a theme with the “best options” listed above. Don’t find yourself with a listing that is dead (sitting on the market forever). Reach out to your favorite REALTOR® for best practices in pricing. Maybe that will be a future “real estate review”!
