Home > Selling a home, Supply and Demand > “I’M NOT GIVING MY HOUSE AWAY!”

“I’M NOT GIVING MY HOUSE AWAY!”

This is another one of those phrases that Realtors hear all the time. It is, quite frankly, a very natural thing to feel and say. You paid good, hard-earned money for your home. You’ve put additional money (and sweat equity) into the house. You’ve lived it in for a period of time and your neighbor who bought at about the same time as you got 120% more than he paid when he sold about 2 years ago.

So why should you give it away? You shouldn’t!

What you have to do is to clearly define what “giving it away” means to you. It’s very subjective.

Ask yourself the following questions:

  1. Why do you want to sell in the first place?
  2. What will you do if you don’t sell?

There are a dozen reasons why people want to sell their homes. Answer it honestly. Perhaps selling isn’t really that important to you. If it is, then move on to the second question – what will you do if you don’t sell? There are only 3 possible answers.

  1. You’ll stay in your home
  2. You’ll rent your home to someone
  3. You’ll move and leave the house vacant

The most common answer is that you’ll stay in your home. If that is your answer then ask the following question – HOW LONG will you stay before your original reason for moving becomes urgent?

If you think you will stay in your house for “a while – until the market turns and houses appreciate again” you should sit down and do some math. Here’s an example which is, admittedly based on theory – no one really knows what is going to happen in the market. We’re going to start with the hypothetical assumption that the market will continue to depreciate for another 9 months, level off for 6 months and then begin to appreciate again.

Soooo…. using my favorite $100 house, let’s look at a couple of scenarios. First where you overprice the home and then at what happens if you try to wait it out.

SCENARIO #1. You paid $90 for your home four years ago. Your neighbor who has a similar house also paid $90 four years ago. He sold his home two years ago for $110.

Your Realtor tells you that a good selling price for your house is between $98 and $102. He suggests listing it for $100.

You know that you’ll probably have to negotiate a little and sell for $97 or so. You will then have to pay a real estate fee of about $6 so you’ll end up netting $92 which is only $2 more than you paid. You feel that that is just “not enough” and constitutes “giving your house away” and you are not going to do that.

You insist on listing it for $108, and will negotiate down to $105 if you have to. After taking out a fee of $6 you will net about $99 which is, in your opinion, “good enough” after all, it’s WAYYYY LESS than your neighbor got. You are being very flexible without giving it away.

What happens next is that your house doesn’t sell quickly. The educated buyers who have been looking at houses for a few months, take a look at your house and they know that, while it might be a great house, there are others out there that are better values. 90 days go by. You then, reluctantly tell you Realtor that you’ll lower the price to $102 – which is the top range of what he originally suggested. Here’s the catch. Based on a continued depreciation your house is no longer valued at $100. It is now valued at about $98. A new group of educated buyers (the other ones have already bought homes), visit your house and reject it. There are some other similar houses that are selling for $96 and $97. Your house sits for another 90 days – and the cycle continues.

Eventually the market does bottom out. Your house is now worth about $92 or $93. You decide that you simply can’t sell at that price and you pull your house off the market.

Scenario #2. You hear your Realtor’s original price suggestion of $100 and decide to wait it out. You do nothing for 6 months. The market has now bottomed out and your house is now valued at about $92 or $93. You feel that things are on track and you’ll just wait for things to rise again.

————-

You can see in both scenarios you are sitting there 6 months later with a home that is worth about 7 or 8% less than you could have sold it for when you started the process. So now you are going to wait for the market to rise again.

Now, to reiterate that this is all hypothetical. The market begins to slowly appreciate and 12 more months go by and your house appreciated in value by about 5%. This now makes your home worth about $97. You are 18 months from when you started.

So – now go back to those two questions. Why do you want to move and what will you do if you don’t sell? This, of course, leads again to the third question – how long can you actually wait before you move.

No one really knows when the market will turn and how quickly it will appreciate when it does. In the best of scenarios, however, you need to understand that in all probability, your house is worth more today than it will be in 6 months to a year- and that it could 1, 2, 3 or more years until it is worth more than it is today.

NOTE: I’ve had a few of my colleagues tell me that the last section of this post is a little harsh. I’ve never been one to try and soften the truth. I’ve seen people absolutely miserable about having their homes sit and sit and sit on the market for 6, 9, 12 months or longer. There’s no reason for that to happen if you take the selling process seriously and analyze the market strictly from a business point of view. Selling a home is an emotional experience but you have to somehow put that part on hold and make your decisions from a purely intellectual position.

BOTTOM LINE:

  1. Overpricing your home will NOT help you get more money from the sale.
  2. Overpricing will probably stop your home from selling and you will end up selling for less.
  3. Holding off until the market turns will not help you sell for more unless you can wait a very long time – most likely years.
  4. What you WANT for your house is irrelevant to the current value of your house.
  5. What you NEED for your house is irrelevant to the current value of your house.
  6. What you PAID for your house is irrelevant to the current value of your house.
  7. What you OWE on your house is irrelevant to the current value of your house.
  8. What your next house will cost is irrelevant to the current value of your house.

BOTTOM BOTTOM LINE:

The question is never “How much do I want to get for my house” the question is “Do I want to sell my house?” If you DO want to sell, then you have to price it based on what people are willing to pay. If that number won’t work for you, then you probably should not be selling.

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