Pricing your home, pre-sale renovations and getting a great deal-- we put conventional wisdom to the truth test.
Unfortunately, fake news is not limited to political posts on social media. Misinformation is rampant elsewhere and too often it is found masquerading as conventional wisdom. No place is this more evident than in residential real estate.
So what can you believe? Let’s bust some common myths and find out.
Myth #1- Price your home slightly above the price you hope to get
Truth Test: Generally False
This theory is based largely on the model employed when selling goods at the flea market. The thought is that if you list for a certain price, you’ll almost certainly be talked down. So if you start higher, the price you settle on will net you more money.
This logic is usually faulty because residential real estate works less like a flea market and more like an auction. In an auction, early interest builds to a crescendo and momentum drives prices higher. By pricing your home competitively and marketing it aggressively you can play into this interest and may ultimately end up selling it above list price.
The rare instance where pricing above market may prove fruitful is when a market is growing, but even then the strategy becomes a balancing act. The overriding goal as a seller is to maximize sale price while minimizing days on market as these factors are directly related.
Myth #2- A great deal and a great house go hand in hand
Truth Test: False
In the era of online property listings, the great house for a great price is mostly a white whale. The hidden gem simply is no longer hidden. Technological changes have evened the playing field, making online searches simpler for even the less than engaged. This makes ferreting out a steal incredibly challenging.
Rather than seeing this change as a negative however, buyers should instead embrace the efficiency of the real estate market and use it to their advantage. Today you can use technology to make your search more effective, save time and reduce your level of effort.
Remember, there are still great homes out there, but in today’s market obtaining them is less about luck and more about knowing exactly what you are after, being ready to act and negotiating favorable terms when you do. An experienced agent can help by researching the situation, understanding seller motivation and making subtle tweaks to your offer to help it rise above the competition.
Myth #3- Pre-sale renovations will pay for themselves
Truth Test: Mixed
Generally smaller items like paint, carpet and other updates to kitchens and baths can all positively impact your bottom line. A common mistake is assuming that full scale renovations are the same.
While addressing the negatives of your home may be worth the investment, turning a C+ kitchen into an A probably won’t, as expenses can be high and individual tastes can vary. For this reason, any investment of over a few hundred dollars prior to sale should be vetted with an agent. He or she can help you understand the impact a project may have on your bottom line.
Myth #4- Your home is an investment
Truth Test: Mixed
Contrary to conventional wisdom, housing is really more of an expense than an asset, particularly in the short term. While growth is possible and may even be likely, the reality of cyclical markets means there are no guarantees.
But don’t worry, home ownership still makes financial sense for many, just keep in mind that as an investment opportunity it also carries significant risk. For this reason, the majority of homes should be purchased with a long term timeline (3 years minimum) in mind.
Myth #5- Buying a home using the listing agent can reduce costs
Truth Test: False
While “eliminating the middle man” in a transaction intuitively makes sense in many ventures, real estate is not among them. The issue is that a listing agent has a fiduciary responsibility to the seller first and foremost. They were hired to sell a home with the most favorable terms. You cannot count on the same level of commitment to your needs as buyer.
In contrast, a buyer’s agent can and will fully commit to serving your best interests. This is important, as having the wisdom of an experienced advocate on your side can far outweigh any discounted commission offered by a listing agent. Add in the fact that the sales commission and other fees typically come out of the seller’s side of the equation and you can see that this myth just doesn’t hold water.
The Bottom Line
Real estate is an ever-evolving industry with market dynamics, proper pricing and other issues serving as a moving target. In such an environment, conventional wisdom is not enough. Staying on top of trends and nuances requires diligence and the focus of a full time agent who knows your search area well.
At Zachary Adams and Associates we have facilitated 100s of transactions in the west metro and have client testimonials that prove our commitment to our clients is more than just talk. If you are considering a move, or simply want to understand your situation and discuss your options, we’d love to hear from you.