5 Ways You Can Sabotage Your Home’s Listing Price
There are many factors that drive the value of a home – location, size, and condition being the obvious and primary drivers. As a homeowner deciding on your listing price, there may be other factors that are important to you, but these variables often have no correlation, or even worse, a negative correlation to price. Here are five factors you’ll need to put aside to come up with a realistic listing price.
Your Purchase Price
Whether you purchased your home a year ago or two decades ago, the price you paid has no bearing on current market value. Real estate markets in most places move relatively slowly most of the time, but they do move. Prices are a function of the marketplace, not the amount you paid for the property.
Your Mortgage Balance
In a perfect world, the price your home sells for will, at the very least, cover the balance you owe on your mortgage. However, depending on the market, that’s not necessarily achievable. Unfortunately, we’ve seen many examples of that in the last few years – before 2008, had you heard of a “short sale”?
While many improvements do increase the value of a home, they do not necessarily increase the value on a dollar-for-dollar basis. A $40,000 kitchen upgrade may only raise the home value $30,000, and with depreciation, possibly less. If your intent is to consider improvements when setting a listing price, with the goal of recouping the cost of those improvements, you may be ignoring the dynamics of the market.
Your Desired Profit
Perhaps you need to clear a certain amount as down payment for your next home. Or perhaps you’re not even an active seller, but merely want to “test the waters” in the hopes of hitting the lottery. While cases of the latter may occur, they are not the norm. In general, the further away a listing price is from approximate market value, the more turned off prospects will be.
Your Custom __ (Landscaping, Swimming pool, Wallpaper, Workshop, etc.)
They say one man’s trash is another man’s treasure. The reciprocal is also true. A green-thumbed seller’s colorful garden is another person’s landscaping bill. A sun worshipper’s swimming pool is a possible hazard to the couple with three young kids. You may find a buyer who prizes your custom features as much as you do, but it’s not likely.
Keep these considerations in mind when arriving at a listing price. Think like a buyer would: he doesn’t care how much you paid, how much money you’d like to clear, or the subjective value you put on customizations and improvements. If you set a realistic price, you’ll avoid sabotaging a sale before your home even goes on the market.