This is a blog that I wrote back in March but I find that it applies now more than ever. Have you noticed that homes are sitting on the market a lot longer these days? In Countryside, it seemed that things were selling in a few days, but now many are sitting for a month or more. Why is that? The short answer is price.
Sellers have caught on to the fact that inventory is low and there are a lot more buyers than there are homes for sale. It can be very tempting to take advantage of this type of market and price your home higher. As a seller, you want to maximize your profit and capitalize on a quick sale. There is absolutely nothing wrong with that. But I have one word for you: APPRAISAL.
When I am working with my seller clients, we have a detailed discussion on what the home is worth in the current market and in their neighborhood. We look at updates and improvements that they have done, we compare recent sales and other properties currently for sale. I take an in-depth look to make sure we are pricing the home to sell for top dollar but also take great care to price it so that it will appraise. That way, the transaction doesn’t collapse two to three weeks into the process.
Why does it have to appraise?
The buyer’s mortgage lender won’t approve a loan that is more than a home is worth. Here is a scenario:
You list your home and receive a contract for $500,000 even though recent sales in your area show an average price of $475,000. You may have a few features the other homes don’t have but even still, the appraiser values your home at $485,000. A $15,000 difference. There are three options at this point:
- One, the buyer can walk away and you have to re-list your home.
- Two, you can drop your sales price to match the appraisal and the transaction continues as scheduled.
- Or three, you can negotiate with the buyer to meet somewhere in the middle. You drop the price a little and the buyer brings extra cash to the closing table to make up the difference.
But here’s the thing, depending on the price point of your home, typically, buyers usually don’t have the extra cash to make up the difference.
Rather than take the risk of your home not appraising and then having to start the process all over again, it makes better financial sense to price it right from the start. Especially when you go to put your home back on the market, you are going to have to lower the price anyway so that you don’t run into the same scenario again. And putting your home back on the market after having it under contract raises questions with buyers and their agents and you might end up with an even lower offer on your home.
Make sure you have your agent show you the recent sales and please do not rely on Zillow for your home’s value. It is computer based model and not necessarily accurate for your neighborhood and what is happening in the current market.
If you are curious about your home’s value or have any questions regarding buying or selling, contact me at firstname.lastname@example.org or call/text: 703-434-9027. I would love to hear from you!