Pricing pitfalls

B - Set the Asking Price: So what are the wrong reasons?

Establishing your asking price is frequently based on irrational motivations. Any headlines below apply to you? 

Basing your price on:

What you need

The market determines a home’s value and its selling price. Even if you’d like to see a certain selling price, that doesn’t make your home worth more.

                      EXAMPLE

A recently retired couple decided to sell. Despite professional suggestions of a realistic asking price, they priced their home too high. Why? They needed enough equity to pay cash for the patio home they had seen in a beautiful empty-nester community.

No serious offers came their way but they were determined to hold out. But in the year they waited to sell, the price of their empty-nester patio home increased, considerably.

It’s hard to price logically when you need a certain profit.

What you paid for it

This often occurs when sellers recently bought but must turn right around and sell. During a normal or slowly appreciating housing market (let alone a down market), the passage of time has not had a chance to reflect an increased value even though the owners mistakenly build an agent’s commission into the asking price.

                      EXAMPLE

One builder constructed a pair of identical homes that were on opposite sides of the street. The costs to build were the same except that one house had to have its water and sewer lines routed a full block because of unforeseen problems. This house incurred additional expenses of $6,000.

It would be tempting to factor that $6000 cost into the asking price. But this builder knew that despite the difference in cost, there was no difference–from the buyer’s perspective–between the finished products. The houses were priced the same, and they both sold. One simply made $6,000 less profit.

An investment you have in your home doesn’t necessarily translate into increased value in the buyers' eyes.

The highest sale in the neighborhood

A home's value usually falls within some sort of a range that's based on selling prices in a neighborhood, complex or subdivision. But homeowners usually want to base their asking price on the home that sold for the highest price in this immediate area.

That one sale doesn’t reflect typical values, just as the home of the same model that sold for the lowest price doesn’t either. Use logic and reason to establish your price.

Quality components in your home

As frustrating as it is, extra structural components–roofing or structural reinforcements, for instance–that are hidden from view won't bring much in the way of added selling value. Today's buyers' focus on glitz and glamour factors made popular in home-focused TV shows and magazines. Builders promote this expectation of “wow” with luxury baths and kitchens.

Many structural components are not that noticeable: top-of-the-line furnaces, underground sprinklers, premium mechanical upgrades, heavy-duty nails, etc. Some values are really lost because people can't see them. Even cutting edge luxury features don’t always command a decent payback.

Appraisers don’t value most of the hidden components; they can’t see them either. 

Super structural features and top-of-the-line features command premium prices when they're new. They're admirable qualities but not ones that provide a good pay back. If you knew then that you’d be selling now, would you have installed these top quality items when building or improving your home?