Retirees can't afford to make financial mistakes because they don't have a lifetime of work to make up for their errors. So if you're preparing for retirement and are planning to list your home, getting the pricing right is critical. This post explains exactly how you should go about pricing your home for sale.
The Big Mistake You Must Avoid:
The biggest pricing mistake you can make is basing your list price on how much money you want to make on the sale rather than basing it on the fair market value of your home. You, like most homeowners, may also be inclined to inflate your home’s value by as much as 8% because of seller bias. This is also a big mistake, and if you do both of these things combined, it can cost you a lot of money. (Read the links above to learn more on this very important topic.)
Home Pricing Instructions for Retirees:
- Type your address into Redfin. Make note of Redfin's valuation for your home. The Redfin home value estimator is more accurate than people at appraising a home. In fact, the median error rate is less than 6%. In many areas of California and other states, it's less than 2%. Are you comfortable pricing at or below what the Redfin home value estimator tells you? You can look at the ZIllow Zestimate as well, though the Zestimate is too inaccurate for us at Home Bay.
- If you're not happy with the price and you're positive Redfin is wrong, it's time to prove it. Find three recent comparable home sales (also known as comps) in your neighborhood that prove your house is worth more than Redfin home value estimator states. But before you start hunting, beware of your bias! Remember, the average homeowner believes their home is worth 8% more than it actually is. If you need comps, let us know.
- Once you've determined your price, evaluate whether it's near a major price threshold. If it is, drop it just below that threshold to reach more buyers. For example, if you decide your home is worth $507,000, price your home at $499,000 and get prepared for multiple offers and overbidding.
Don't Be Afraid To Price Low:
In the above example, the house priced at $499,000 is likely to sell for more money than the house priced at $507,000. Why? As Zillow CEO Spencer Raskoff explains, the best pricing approach isn’t to think about the money you need; it's to instead focus on buyer competition. If buyers are competing for your home, it puts upward pressure on the price, and your home will sell for more.
In fact, studies have shown that if you price your home at or below value, you'll earn 4% more on your home sale than you would if you price high. On a $500,000 house, that 4% means you'll get an extra $20,000 to fund your retirement.
Learn From Those Who Price Right:
We frequently see the above scenario play out at Home Bay. Banks selling inventory price their homes low, get multiple offers and sell above asking price. So do most home flippers. And so do most sellers in the San Francisco Bay Area, where pricing 10% below fair market value is common. In fact, we recently had a condo sale in San Mateo where the owner smartly priced at $599,000, got tons of offers and sold her property for $740,000.Sometimes it’s smart to trust your instincts. But other times it is smart to trust the data. The data holds you need to price right, not high, to get the most money at closing.