It’s important to realize what matters and what doesn’t in pricing your home. An area where homeowners get into trouble is that their opinion of their home’s value – or, what they think someone will pay for it – is colored by factors which really have nothing to do whatsoever with how much they can sell it for.
These factors include how much they paid for the home, how much they need to get when they sell the home, or how much money they have spent upgrading the home.
In an episode of Million Dollar Listing New York, Realtor extraordinaire Frederik Eklund tells his client something like: “I paid $2,000 for this suit. Are you going to buy it from me for $2,000?” The answer is no, obviously not. That suit is perhaps worth $2,000 to Frederik, but what’s it worth to someone else?
Even if you could find someone else for whom the suit is a good-enough fit, they might be willing to pay a only couple hundred bucks for a second hand suit – even a nice one. The same is true for virtually every aspect of your home. You know what it’s worth to you, but what’s it worth to someone else?
That is the question, and it needs to be answered objectively. Remember: in most cases, buyers have options. They’re not just looking at your home – they’re looking at lots of homes. They are comparing your home to others, and looking at price, condition, location, and a whole host of other factors before they decide if they even want to drive by your home, much less go inside and then maybe write an offer on it.
You might feel your home is worth a million dollars – but be conscious of the Principle of Substitution. If a buyer has $1,000,000 to spend on a home, are they going to buy your home, or buy the home down the street which is pretty much the same only it’s 1,000 square feet bigger on a double lot?
If you’re asking $500,000 your home, check into what else a buyer can get for that same $500,000 and honestly consider if your home is an equal (or superior) substitute for another which is also asking $500,000. If it’s not, you’ll need to re-examine your expectations for your home’s sale price. No matter the situation, buyers always choose the home that offers the best price, condition, and location for their money.