1. Focusing on price per squarefoot
It would be so much easier if you could take the average price per squarefoot in your neighborhood and multiply it by the square footage in your house and then BOOM there's the price it should sell for! Unfortunately it's not that simple or straightforward. There are so many other factors that contribute to an appropriate price per square foot, like lot size, stories in the house, updates & upgraded finishes, or extra amenities like a pool. The price per square feet can range so much from house to house & is only really accurate if the homes are identical.
2. Listing over market value
Sellers ask us all the time, "Why don't we price it just a little high to see if there's a buyer at that price, and if not then we'll just reduce the price later?" That is easily one of the worst decisions a seller can make before they even put the house on the market.
There are 2 things overpricing will do:
1) Make you less money & 2) Reduce the number of buyers who interested in your house
1) Our studies show that sellers see an overall average of 5.5% loss by overpricing, which can add up to $22,000 left on the table plus an additional 2+ months in mortgage payments while on the market.
2) Overpricing a house is a sure-fire way to deter buyers from stepping foot inside your house. On average, 60% of buyers in the market will look at your house when it's priced at market value. That buyer pool is cut in half down to just 30% when you overprice your house by 10%. Trust us, you want more eyeballs looking at your house!
more eyeballs = more interest in your house
more interest = more competition for your house
more competition = sell your house faster & for more money
3. Looking at the wrong comps
Real estate professionals are trained to use comparable sales (or "comps") to determine a good list price for your house. Recent sales data is the most accurate indicator of market value, becase that indicates the price an actual buyer in this market was willing to pay for a house very similar to yours. And at the end of the day, buyers determine value. So using the wrong comps (houses outside of your neighborhood, different size floor plans, better or worse condition, etc.) is a guaranteed way to list your house at the wrong price.
4. Referencing an online estimate
Popular real estate websites do NOT always have acurate pricing data. This is because their "estimates" are determined through pricing algorithms, rather than actual comparable sales (and you know how important comps are!). Those pricing algorithms are really broad estimates of what your home could sell for because they aren't able to take intangible factors into account like floor plan, layout, updates, upgraded finishes, and buyer demand in your neighborhood that Realtors are. These websites give you "guess-timates" at best.
5. Sticking to what you want to net
Unfortunately, you don't get to decide what your house will sell for, otherwise you would list it for more money than you ever dreamed of, right? The reality is that buyers determine value. While you want to make a lot of money when you sell your house (who doesn't??), your buyer also needs to feel like they're getting a great deal. This means the price you and your future buyer agree on will be a number you both are happy with, which oftentimes isn't in perfect alignment with the exact number you would like to net.
The best way to calculate your net proceeds is to work from the top-down:
Start from the price that comps give you, subtract your loan payoff amount, account for selling fees, and end up at your net.
6. Figuring the cost to rebuild
Would you be willing to pay the price for a brand new house, and get your house in return? Of course not! The age of a house is a factor in determining comparable sales, meaning that houses built more than a decade apart are typically not considered comparable. Why? Because buyers aren't looking at your house as if it's brand new. They find value in it for the condition it's in. If buyers were interested in paying for a brand new house, they would decide to purchase a new construction house from a builder. Resale houses are priced and sold totally different from new construction houses.
7. Sitting just above/below a price break
Most buyers have a good idea of their ideal price range that they're shopping in, so oftentimes their Realtors set their MLS search criteria between a certain price range. For example, with a budget of $500,000 a buyer will often look in the $475K-$500K range because they know they want to stay within their budget, yet they're not interested in the cheaper homes for sale.
I know you may be thinking, "Why wouldn't buyers want to just see what's on the market for any cheaper and save some money?"
Well, the cheaper homes in a buyer's desired neighborhood often times don't fit their needs - They're too small, not as updated, have a smaller yard, the layout isn't functional, it's on a busy road, etc. And the buyers that you want shopping for your house know exactly what they want & are excited to make a move on the right house when they see it, right? This is why pricing a house within big "price breaks" is important to getting the most qualified buyers to see your house.
If you list your house just below a price break like $474,999, then the buyers on a search starting at $475K will never see it! Likewise, listing just above a price break like $505,000 will exclude everyone with a $500K budget.