To avoid selling your home for less than it’s worth and leaving money on the table, it’s helpful to find out what other people have done wrong. These are example of costly mistakes, including mistakes made by banks. The final story demonstrates how pricing your home right the first time is crucial in a changing market.
Underpricing, the Easiest Way to Lose Money on Your Home Sale
The #1 reason people lose money on their home sale (as in, not getting all the money they could) is underpricing. They think their home is worth ‘x’ dollars without researching the value. They put their house on the market, sell it for less than it’s worth, and never realize their mistake. That’s why is so critical you have a real understanding of the value of your home in today’s market.
A perfect example is the sellers who sold three acres – worth about $300,000 – for only $80,000. They lived about 30 miles away and didn’t realize the development potential the property had. They hired an agent who was unfamiliar with the area, who also didn’t realize the development potential.
Their buyer was knowledgeable and experienced with developments. He researched the zoning and discovered the three acres were zoned for high-density condos. The sellers did not know about the zoning, nor did they know the county was planning to build a new road bordering their property.
You can see where this one went. In the end, the sellers were not aware they left $200,000-plus on the table until condo-building began.
Banks know that if a buyer makes an unsolicited offer, most of the time, the offer is below fair market value. In one case, a bank lost more than $30,000 on a mistake based on that assumption. Two people were interested in buying a piece of property. It was in an excellent location and unique among properties available in the area. Both buyers were anxious to make an offer before someone else could offer more.
Either one of them would have been willing to pay the fair market value of $100,000 for the property. Money was no problem; both buyers had the ability to pay in cash. Unfortunately, the bank refused to take any offers on the property They would not budge until it was listed on the open market. For some reason, possibly due to an oversight, they put the property on the market for $67,000.
First, the bank underpriced the property by $33,000. Second, the hired agent didn’t market it properly. Errors were made in the MLS listing. As a result, it did not show up in search results for other agents who had buyers looking for that type of property. The address was incorrect. As a result, the listing did not show up on any of the real estate websites that use a map display. Finally, the agent neglected to put a sign on the property. (The person who eventually bought it lived down the road and drove past the property every day).
After the bank refused to work with the buyers, each waited for the listing to appear. When it didn’t show up in searches, they gave up. Ultimately, both buyers moved on to find other pieces of land. Meanwhile, the property sat on the market, unnoticed. Because of the agent’s errors, no interest was generated, and the property went into foreclosure.
The man who lived nearby knew the bank had been trying to foreclose on the property. He did some research on the foreclosure at the courthouse. He found out that the bank had successfully foreclosed on it. Knowing it had to be listed somewhere, he went online and searched through all the properties for sale until he found the listing. To his surprise, it was priced well below the market.
Had the bank and agent not made mistakes, the two originally interested buyers would have made offers and likely started a bidding war. There is a good chance the two buyers would have driven the price up to the fair market value.
Excerpted from my book “Selling Secrets – You Can’t Afford to Miss”
Ricardo Parente, Realtor®
Coldwell Banker Realty | Winter Park, FL