Regardless of whether you’re working with an agent or doing a for sale by owner (FSBO), these three common mistakes sellers make could end up costing you a fortune. But we’ll tell you how to avoid them.
Every first-time seller makes mistakes when selling their home. You just hope the ones you make are inexpensive. Outside of failing to clean, declutter, update and otherwise prepare your home for sale, these three missteps are the costliest.
Mispricing Your Home
“How much is my home worth?” You’re not going to automatically have the answer to this question.
Pricing your home too high will cut down the number of potential buyers who even know your home is for sale. Most people search for houses online before they tour in person and one of the parameters they use is price range. If your home falls out of their price range they won’t even know it’s for sale.
Another thing to consider is that a home is at its highest value when it first comes on the market. So you want as many people as possible to see your listing before it becomes old news.
That brings us to the second reason not to overprice: it could lengthen the amount of time it takes your house to sell. If it lingers too long you could be forced to reduce the price, which will lead buyers to wonder if there’s something wrong with your property.
Underpricing your home could be just as bad, especially if you’re in a seller’s market. If homes in your area are selling within 30 days of listing and at prices at or above market value, then offering your home at below market value could send up a red flag to potential buyers. They will assume something’s wrong with your property because otherwise, you wouldn’t leave money on the table.
To avoid mispricing your home, research sales of comparable homes (“comps”) within a half-mile radius. In a seller’s market, home values can shoot up quickly so Realtors recommend only going back three months at most. If there hasn’t been much activity in your area, researching sales from up to a year ago is acceptable. (You may also want to read Price It Right: FSBO Tips and Tricks.)
When looking for comparable properties, look for homes of similar size, age, and offering similar amenities. Sales of homes that are the most similar to yours will give you the best idea of what your home is worth.
Failing to Fix or Trying to Hide Your Home’s Issues
Any Realtor will tell you: if you know of an issue with your home, you should fix it before trying to sell it. The reason being, most buyers want to purchase a live-in ready home — not a property they’re going to have to fix up as soon as they move in. So even if you disclose the issues up front, you will drastically shrink your pool of potential buyers by not fixing major issues.
To find the most economical way to make the repairs, solicit estimates from at least three trusted vendors and ask your local hardware store if there’s an easy way for you to make them yourself. Upgrading plumbing, electrical wiring, and fixing a leaky roof can actually add more value to your home than the cost of the repairs.
If you don’t have the time or money to fix what’s broken, then the next worst thing you can do is try to hide it. Most buyers will order a home inspection prior to closing the sale. The report from the home inspector will delineate any and all immediate and long-term repairs that need to be made. If there’s anything in that report that you haven’t disclosed you risk blowing up the sale or at the very least, leaving money on the table. The buyers will take that opportunity to negotiate a much lower price because you weren’t honest up front.
Not Reviewing Your Closing Statement
Are you fully aware of how many closing costs are? When you close the sale of your house, you will receive a closing statement. It will outline various costs and fees, and who pays for them, and it will give you the net dollar amount you should receive. For better or worse, these statements are often templates completed by a human being at the Title Company and thus, mistakes happen. (We also suggest you read The 9 Most Common Closing Costs Explained.)
Ask for a draft closing statement at least a week prior to your closing date. Print it out (it’s much easier to miss things when you review a document digitally) and then go line by line in person with your agent. Ask him or her to verify anything that doesn’t look right to you.
It’s also a good idea to have a calculator with you and to verify any fees or costs that are based on an equation (like your real estate agent’s fee). Closing statements are usually created within a spreadsheet template and sometimes the equations are incorrect.
There are hundreds of small mistakes people make in the process of buying and selling a home. You just don’t want the mistakes to cost you thousands of dollars. As long as you appropriately price your home, fix any issues, and review your closing statement, you should be able to save yourself that kind of heartache.