There’s so much information these days that you can read up on anything and become an expert. Or can you?
Self-proclaimed real estate junkies introduce themselves to me all the time. “Oh, I know all about the market! I’m on Realtor all the time!” It’s true that you can see patterns in published data that will tell you trends in pricing and neighborhood activity. What’s not as apparent is the nuanced conversations that take place before, during, and after contract negotiations. Optimism and fear drive people to do things at times that hurt their self-interest. They read news stories about the market, hear horror stories from co-workers, and because there’s emotional self-identity tied in with their home, they’re influenced to have strong opinions about what they should do. What’s really interesting is that if you ask any real estate agent who’s been in the business a while, they will tell you that the industry changes constantly.
The cost to not really understanding may be selling at a price that’s lower than you could have gotten or spending too much on improvements. A home purchase or sale ranks as one of the largest financial transactions that most people will ever make so we don’t want to make mistakes. So let’s go over three costly common myths that may cost you.
What is fiction?
1 Setting your price higher so that you have room to negotiate down. Listing your home too high may ultimately net you a lower price than you really wanted. There’s some interesting reasons for this. 1) Technology makes it easy to search for homes and when people search, they search with a range of numbers with the top of the range being the cutoff. For example: $500,000 to $550,000 pulls up all houses that are priced at and between those two price points. If your home appears above the range, some buyers who would qualify to buy your home aren’t even seeing it! 2) Agents often won’t show a home that’s over-priced 3) So if the sellers decide to finally get some action and drop the price to market value, an unfortunate thing happens. When the home sits for more than three weeks, buyers and agents alike begin to believe that something is wrong with it! Fewer buyers will go see it and statistically, homes tend to sell for less than market value if they started out too high and stayed on the market too long. A Redfin study reveals that the first week a home is on the market, it receives nearly four times more visits than it does 30 days later.
2 Expecting to recoup your renovation dollars at resale time. While new a HVAC system, roof, or new flooring will ensure your home sells quicker, you probably aren’t going to recoup what you spent. Believe it or not, two of the best investments are attic insulation (120% ROI) and a steel front door (103%). Major kitchen remodels may get you 75% of what you spent and a bathroom remodel just above that at 76%, but a minor kitchen remodel will snag you 103% according to Remodeling: Cost vs Value 2016 .
3 Going Green automatically means a higher listing price. Solar is everywhere these days and many people install solar to reduce their energy bills because this is Sacramento and it gets hot in the summer. But adding solar doesn’t always mean you’ll recoup your investment. It may be the desirable feature that will entice a buyer to choose your home over another similar home without solar. Buyers shy away from homes that are priced significantly higher than comparable non-solar homes.
So what is fact?
Real estate professionals not only have data to show trends, but they start to understand it from conversations with buyers and sellers long before it percolates out for common consumption. A good agent will help you understand the impact of your decisions in the context of overall economic trends and help you to make decisions that will net you the most money in the local market you’re in.
Contact me for a free factual based home market valuation and advice that will ensure you’re making a decision that won’t cost you more than you make.