Don’t Lose Money on Your Home’s Features
When I sit down with sellers to discuss their home’s price, the discussion usually turns to its features. A spectacular view, a cool garage workspace, and a one-of-a-kind garden are the sort of things sellers typically value about their home.
Those features may be selling points. But potential buyers might not value them nearly as much as the seller does. That great view may not be something buyers want to pay extra for. Some might see the garage workspace as a liability. Your unique garden might simply look like a lot of upkeep to a buyer.
When sellers get attached like this to features of their home, it usually results in what Realtors call “Seller Pricing”—based more on the seller’s perceived property value than actual market conditions. After spending time on the market, the home is eventually reduced in price.
Here are three ways sellers and buyers can avoid losing money on home features.
1. Test the waters, briefly. You love your view, garage, or garden. You’re convinced someone else will love it too and won’t mind paying extra for it. And you might be right. But by pricing your home higher because of what you see as a special feature, you’re shrinking the potential market. A beter strategy: Try listing at the higher price briefly. If that view-fanatic buyer is out there, chances are she will show up early on and make an offer. If not, drop the price quickly and sharply to keep your home from becoming “stale.”
2. Don’t get emotional. This is a great time to buy, especially if you have a down payment, a stable job and good credit, and you’re committed to the community for the next few years. Just be careful to always think like a seller, not just as a buyer. Consider the potential market value of your home’s amenities five years down the road. To achieve the maximum equity, try not to overpay for those features, either for competitive or emotional reasons.
3. Don’t just focus on your needs. Case in point: In 2005, a buyer in San Francisco bought a home with no garage. He didn’t see the value in one for himself. The house was on multiple transit lines, he used his bicycle for transportation, and he knew he’d have access to a leased garage space if he needed it. Fast-forward three years. The buyer has to sell in a slow market. He didn’t believe his home should be priced less than a comparable home with a deeded garage because his house was so centrally located. Plus he had the leased garage space nearby. What he didn’t consider was that 25 percent of buyers commute to work and don’t want to risk losing a leased garage space. Buyers wouldn’t even look at his home’s photos online, let alone go to the open house, due to its lack of a garage.
It was a clear example in which the buyer failed to think like a seller. Don’t let yourself fall into that trap.