Pricing Trends – Seller Valuations vs. Market Value
With a market increasingly turning into a seller’s market along the Emerald Coast, a new pricing trend is emerging. Sellers are overvaluing their properties. This is not just a local phenomenon. According to a recent study quoted in a Seattle Times article “Owners Tend to Overvalue Homes“, the home value in someone’s mind is usually 8% higher than market value. I can understand this. My husband and I did a huge remodeling job, so, human nature is we feel every single penny we put in, we’ll get back if we sold our home. As a real estate broker, I know that is not true. Put it this way, if you spend $5000 on upgrading your sprinkler system, is a buyer going to pay you $5000 more for your house, or even more than that? No. Not a penny. Why? Because everyone has a sprinkler system in the example neighborhood, so it’s expected.
This is a home pricing scenario that is played out in most sellers’ minds… “We paid “X” for something, so we should get at least that back.” Let’s take another example, a swimming pool. Do you know that some buyers will eliminate looking at a property because they don’t want a pool? If they do want a pool, and it cost you $40,000 to install, will you get $40,000 more for your house? Emphatically, no. Projects don’t generally return the initial investment or more. A specific example cited in the article was the return on a major kitchen remodeling project. In reality, these projects typically reap 67.8% at time of sale. (Check out this Cost Vs. Value report to find out what you realistically should expect from home improvements when selling.)
Left out of the article, a common reason for overpricing is the tendency to price at what the seller “needs” for a future purchase or project. It may have no relevance to market value. A similar pricing “strategy” is to pick a round number. For example, a seller needs to make “$100,000” (not $39,000) or sell for “$1,000,000 (not $880,000). Why? It’s is human nature!
It’s Wendy… It’s Sold!
Wendy Rulnick, Broker, Rulnick Realty, Inc.
Call 850-650-7883 ext 204
Email Wendy: [email protected]
Wendy Rulnick, Broker, has been featured in “Kiplinger Personal Finance Magazine” and “Florida Realtor Magazine”. Wendy Rulnick sells real estate in Destin, Santa Rosa Beach, 30A, Miramar Beach, Seagrove Beach, Watercolor, Sandestin, Seaside, Crestview, Rosemary Beach, Mary Esther, Shalimar, Fort Walton Beach, Niceville, Bluewater Bay, Navarre, Panama City Beach.