Debunking Common Real Estate Myths for Sellers
Hey all, Zach McDonald, your real estate agent with Real Property Associates, and in this video we’re going to debunk some common real estate myths for sellers.
This video is primarily going to be the most helpful for somebody who maybe is selling for the first time, or maybe you’re even selling somebody else’s house, a family member’s house, or maybe you came into a marriage and you didn’t own or go through that home buying process. You may be looking at this process of selling a house as a new adventure. So if you’re in that situation, this is probably going to be the most helpful for you. But either way, if you’ve never sold a house before, there are probably some things that you’ve been thinking about or maybe people have told you that really aren’t necessarily true. So in this video, we’re going to debunk some of those common myths that people encounter when they’re thinking about selling a house.
Myth number one, price your house high to leave room for negotiation. I have this conversation with every single seller and well, okay, that’s a little bit of a stretch, but most people that have never sold a house before are the ones that I would be having this conversation with, and they are going to think about negotiation strategy. There are different strategies in a real estate negotiation or any negotiation for that matter, but price is usually the most important piece of that negotiation. It sets the anchor of where we’re going to be dealing with buyers. So as far as it comes to price, there is this old adage of, hey, let’s price it high and then leave some room for negotiation. Well, the hard part with that is when we price high, we’re usually overshooting the market. And when people are comparing your house with other people’s houses, recent sales, or even other houses currently on the market using a different strategy, your house stands out like a sore thumb and not in a good way. They’re walking through your house and they’re walking through everybody else’s and they’re going, man, that house is definitely not worth what they’re asking for it, and it doesn’t get offers. The other houses get offers and they sell, and sometimes they sell even more, but they’re using a different strategy. So typically when I’m talking about price, we’ve got the price above the market and try to negotiate down. We also have pricing it at market value. That’s where you look at recent sales and you compare this house with the other house and you come up with a price that’s in line with those other recent sales. And if that’s the case, your house is usually going to sell for the asking price or right around it and sell relatively quickly. The other pricing strategy that you see a lot more in a hot housing market is where you price a little bit on the low side of the value. Maybe it’s still within that value range, but it’s not what maybe you could list it for. And the idea there is you’re stirring up a lot of interest and you have a lot of buyers coming in and potentially multiple offers pushing the price up. And if I looked at a sampling of different houses, the people that have that strategy typically end up getting more than the market value, especially when it’s competitive. Now, there are different risks associated with every single strategy, and of course you don’t want to list your house for less than you’re willing to accept, but if you can find that happy medium where you’re pricing it at a competitive point, but also attracting the most amount of buyers, that’s where you’re usually going to have the most luck with the sale, getting the best price, but also selling it in a timely manner. And usually those things go together. They don’t necessarily go separately. I would also say when you’re thinking about price, typically the houses that price for the most end up doing price reductions and incurring this type of stigma. And buyers say it. They say, oh, why has this house been sitting on the market? Why does nobody else want to buy it? Well, if that’s the conversation, that’s not the best narrative. And usually what happens is if you have to drop the price, people are still expecting to get another discount off of that. And I’ve experienced it myself. If you push the price and you drop the price, it’s a downward spiral. People aren’t expecting to pay the asking price because well, nobody else was willing to pay it, so why would they pay it? And they go into this herd mentality. People by nature, most people will follow the pack, and if there are multiple offers, they’ll do it too and they’ll pay more. And if there aren’t any offers, they’re going to be a little bit weary and they might want to get a discount for making that purchase.
Myth number two, open houses are essential for selling your house. Well, if anything debunked this myth, it was the Covid 19 pandemic. We saw in the Seattle area specifically one of the hottest housing markets in the country that we’ve ever seen. And we couldn’t hold open houses and houses were selling multiple offers over asking price. And it was the interest rates, right? Interest rates dropped, everybody could afford more. They wanted something different. Maybe they wanted to get out of the city and into the suburbs. Things changed. But what changed also was the open houses, those went away and houses were still selling. And that’s because open houses don’t tend to sell houses. If you look at any type of research around this, statistically speaking, people don’t buy houses from coming to open houses. And I made a whole video about this during the pandemic to share with clients because I already knew this, but I wanted to encourage them that they didn’t need to have an open house to sell their house. Now they’ve come back by and large, some people are still holding them. I’d say many people are still holding open houses, and we hold open houses as well when clients want to have open houses. But I think open houses are mainly for people to be able to go explore and see, but they’re unnecessary in today’s market. My mom did real estate before the internet, and people would come into open houses because it was a lot more difficult to see a house if you didn’t already have an agent. And it was also really hard to find an agent unless you knew a friend of a friend or nobody on social media was telling you they were in real estate and you didn’t have as easy access to the internet, you actually had none. So there wasn’t a good way to find somebody unless it was word of mouth where you walked into an office or you walked into an open house. So open houses were a great tool maybe 20 years ago, 25 years ago, and they still are beneficial, but the benefit has mainly worn off. If you are a buyer, you can find an agent online, you can get pre-approved, and if you have an agent or you don’t need to go to an open house. And if you’re not working with an agent and you’re not really a willing and able buyer, so as a seller, you don’t necessarily want that person or a neighbor walking through the house to come take a peek. So personally, I think it’s unnecessary to have an open house. I think it’s a tool in the tool belt, and it probably always will be a tool in the tool belt, but unless you have extenuating circumstances where you can’t have regular showings of the house, private showings with a real estate professional, then I think that the open house doesn’t serve the same purpose that it used to real estate.
Myth number three, renovation will make more money. This is another common conversation that I have with sellers. We talk through three different things. We talk about prep work, how to get the house ready, the presentation, what that looks like, how we’re going to market the home, and then the pricing. We just talked about pricing in the first point, and we talked about presentation in the second point. So it only is fitting that we talk about the prep work a little bit, and it’s common that sellers think I need to spend a bunch of money, or they have a fear that they need to spend a lot of money to get their home sold, and I want to put you at ease right now. That’s definitely not the case. If you are thinking about real estate and a sale specifically where you’re essentially trying to maximize your net proceeds, or at least that’s what most people are trying to do, you want to think about what’s going to return you more money than what you put out. And most things are not going to do that. remodel.com has a great PDF that they put out on an annual basis. So if you aren’t familiar with it, go check it out. I think that this resource does a great job of breaking down the cost and the benefit of doing certain projects that people might consider before selling their house, and they break it down by region and even by some of the major cities. So on a regular basis, this report shows very few things that return a positive ROI if you were to spend money, pay contractors get permits, do it right when it comes to getting your house on the market. Now, usually a small kitchen remodel or bathroom remodel, and these are putting new floors and getting a new vanity or putting some new countertops, but not changing the layout. The big stuff doesn’t work. Maybe adding a deck if you didn’t have a deck or a patio or putting on a new front door or a new garage door. Some things you might consider bigger. Those aren’t super expensive, and they usually do enhance the curb appeal or the experience of a buyer in a house. But a lot of the things that you might think are going to add value will not add value on a sale. So some of that’s going to come down to conversations with people that you trust, your real estate agent contractors. But I would keep in mind that when you’re selling your house, it’s more about what’s going to return you more money in the end than it is what’s going to get you a higher sales price. And of course, you’re going to sell your house for more if you do big updates, but it doesn’t really matter. It’s not worth the effort to then get less money. Doesn’t make any sense. So myth number three, I think is busted in this scenario. Yes, there are things you can do to improve your house, but those things won’t necessarily make you more money.
Myth number four for sellers is that the online valuation tools are giving you an accurate number. I think the online tools are better than they used to be, and I also think this myth is less commonly believed as well. I think people are starting to clue into the fact that just because Redfin or Zillow says your house is worth something, it doesn’t necessarily mean that I have a tool that I use and provide clients with, and it’s called Home Bott, and they get a monthly report about their home value and the equity in their home. And I think Home Botts a great tool as well. But again, it’s an estimate. And the point is to give a vague idea, an update on their financial situation on a monthly basis, you get a report from your financial advisor, or you can even go on a daily basis and see how your stocks are performing. But it’s harder to get that on a house, and that’s what these tools are trying to do. But they don’t go inside of your house. They don’t know what renovations you’ve made. And even if you tell them what renovations you made, they don’t know how a buyer’s going to feel about your house. And your house is ultimately worth what somebody is willing to pay for it. So as we’re considering the value, your house is being compared with other homes, and a bank appraiser is going to tell you a specific number because that’s their job, and they have to do that, that’s what the bank is going to want to see. Your tax assessor is also going to give you a specific number because again, they have to, that’s where they need to land. They can’t just have a, well, the house is worth somewhere between here and here. If you look at Redfin’s algorithm or Zillows, and not the algorithm specifically, but the estimates, there’s usually a number that they give you and then numbers below it, and the range is probably a better way to look at it. What’s the value range for the house? And if that range is really, really big, like 650,000 to 900,000, whoa, that’s not a very accurate number, right? That’s a huge difference in value. If that number’s really tight, it’s probably a little bit more of an accurate online valuation. So when I talk with people about selling their house and we come up with pricing, we usually have a really tight value range. It’s typically 25 to 50,000. And if you’re looking at the luxury price points, maybe it’s a hundred or $200,000 range. But the idea is that you’re looking at a relatively close range, and then you’re deciding how you want to price based on the market conditions and the strategy that you want to use.
Myth number five, and this is the last myth for this video. It’s not the last myth, but myth number five is that you should wait until spring to sell your house. I’m sure many of you have heard this. Some people talk about buying a house in the spring. That’s also a myth that buyers encounter, and I made a whole separate video about that. So if you’re thinking about buying a house, maybe you haven’t done that before, and you’re also going through the selling process, you might want to check that video out too. But for sellers, there’s this notion that if they want to get the most money for their house and they want to have the most amount of buyers looking at their house, they got to sell their house in the spring. Now, if we look at historical data, they’re not wrong to think that the most amount of buyers are out in the spring. There’s a reason that people think about this, that they should wait until spring to sell their home. Historical data also shows that usually the spring and early summer is where you see the highest median sales prices for the year. But if we were to consider all the factors, there are many reasons why it doesn’t make sense for somebody to wait until spring to sell their house. Maybe you’re buying another house and you can get a better price for your home purchase in the fall, late fall or early winter, and you buy that new house. Well, do you really want to wait? Let’s say you bought in the fall. Do you really want to wait all the way to the spring and pay a bunch of more mortgage payments? Is that going to be a better situation for you? Another negative that we come up against in the late spring especially, is it the weather’s getting nicer. And you know what happens when the weather’s getting nicer? People travel, especially in Seattle. So if you’re in a situation where you have people traveling now, you don’t have as much activity on your listing. You don’t have as many people looking at it. If you look at the data for the sales, you’re typically looking at things that were under contract 30 days to 45 days prior. So what that means is that a sale in April or a sale in May, might’ve been under contract in March or early April, which is hardly spring. So if you’re trying to time it in some kind of perfect scenario, yeah, the spring is definitely not a bad time to sell. If you’re listing your house in early winter or late winter, you may find yourself in a situation where depending on market conditions, again, every single year is different. So this is not necessarily going to apply the same way in every single year, but historically speaking, you have the least amount of homes available coming into the new year or at the beginning of the year.
So if you’re putting your house on the market, then that’s where you have the peak amount of competition. All the people that made New Year’s resolutions are coming to the market. So I would almost say that late winter is probably a better time to list your house than late spring. But again, every year is a little bit different. And I guess the overarching theme here is that there are benefits and drawbacks to selling any time of the year. The spring is not a bad time to sell. It’s a great time to sell, but if you find yourself needing to sell at a different time of the year, it may make sense to go ahead and get that done.
I hope that you got some value out of debunking some of these common real estate myths for sellers. And if you made it to the end of this video, I know that you got some value out of it. So please consider giving a thumbs up on this video, dropping a comment, sharing some love, or even some of your thoughts about the housing market and some of the myths maybe you’ve encountered as a seller. And if you know somebody that could benefit from this video or who’s thinking about selling their house, please consider sharing it with them.