This is a question that comes up quite frequently…After all, this is a free country. Why can’t I put my house on the market and set the price myself?
These days many people are doing just that. Especially in the upper price ranges, home owners who want to sell are taking the inititive to price their homes the way they want. If I bought my home for $400,000 six years ago, saw its reputed value go to $775,000 a year or two ago, why can I not ask $750,000 or even $775,000 for it? That’s the only way I’ll make a tidy profit and also pay for those upgrades I put in such as the new roof, the landscaping and the painting inside and out.
It seems to make sense. Sellers decide what they need to get and then put it on the market for that amount. Only it doesn’t work that way. First, buyers don’t flock to homes that are priced $100,000 to $200,000 or even $20,000 over comparable homes in the same neighborhood. To the buyers, that roof is supposed to be there. It’s not an “amenity” as we are now saying in the biz. It’s a requirement. Same goes for the landscaping and the paint. If you had added a room or a bathroom, different story.
Sellers know all this, but many feel they have to try out their own prices anyway, “run it up the flagpole” so to speak. What they are secretly hoping is that a buyer will come by who absolutely falls in love with their house, with their decor and their way of life. Then, that buyer will pay more for the house, blinded by emotion, I guess.
Does this happen? Oh yes, it surely does. Buyers fall for houses just like we all go into a tizzy when those certain special pheromones float through the air. But, just as a crazy romance runs into the brick wall of reality, so, too, do buyers. Most buyers, especially those naive ones who fall off the turnip truck in front of that special house, need loans. They have to get the loans from banks and that’s where the brick wall comes in…Appraisals are always called for and appraisers are looking for the true value of the home which they determine by comparing and contrasting it to other, similar homes. No romance, no hazy emotional attachments here. Nope, it’s all cut and dried. If your house is similar to neighborhood homes currently valued at $625,000, that’s the limit to which the bank will lend. End of story. If the buyers still want it, they have to come up with the difference in cash. Few buyers are that in love.
Is there a way out? There surely is…Several, in fact. If your buyers offer cash for your property, there you are. No appraisal necessary because there’s no loan. Cash buyers exist, too, perhaps far more than you might imagine. But, tday, most buyers with that kind of dough are smart enough to realize they should be getting a great deal, not paying through the nose.
Another way to get your price, maybe, is to offer to finance it yourself. Seller-financing is a great inducement to many buyers. It’s a little complicated, but it’s certainly not brain surgery and there are plenty of ways to protect yourself against any potential pitfalls from defaulting buyers. Of course, now your money comes in monthly installments instead of nice big pile of moola. If that’s OK, this is a good way to go.
A third way is lease-option your house for a specific period of time. If you specify your price after, say, 3 to 5 years, maybe it will be worth it by then and the lessee-buyer will activate the contract and purchase your home. In the meantime, whatever they do, you’ve had all that lovely rent.