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Selling Real Estate |
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THE PITFALLS OF OVER-PRICING YOUR HOME
Marketing and price are the two most important factors affecting the sale of your home, and price is certainly the most important. Failure to price your home competitively may result in a long, frustrating sales effort and may produce a price far below the original market value. Real estate, like everything else, is market driven. Overpricing prevents a successful sale in the following ways:
Target Buying
Realtors will spend their time showing more salable apartments and will use yours as an example of an overpriced unit to help sell a competing home.
Psychological Barrier
An overpriced home will scare away buyers who may have liked everything they saw in yours, but found something cheaper down the street. Even when buyers know a home is overpriced, they often will not bother to put in a realistic offer.
We Can Always Come Down In Price
This is a fallacy. By the time you reduce your price to market value, buyers for the new price have bought elsewhere. The listing is old. Realtors toured your units weeks or months ago. They are now seeing new homes for sale and will rarely revisit yours. That means their buyers won't see it either. Once you've lost the momentum of the initial period, it's sometimes not possible to regenerate interest.
Collapsed Sale
Any offer received which is conditional on financing may collapse if the bank appraiser says the home is worth less than the sale price.
Something Must Be Wrong With The House
Buyers and their realtors may begin to think there is something wrong with a complex that has been for sale for a long time.
Market Changes
Increases in interest rates or any other market adjustments will drive buyers away who may have bought previously. If the housing market drops, your home may be worth less, necessitating an even greater price reduction.
RENOVATING BEFORE A SALE
Clients buying and selling frequently ask me about renovating a home. Will they get their money out of a renovation and which part of the home is more likely to generate a payback when it comes time to sell?
Every home is different and some need more work than others, but as a rule of thumb, there are some areas of every home that benefit from renovations when it's time to sell.
You can expect to recover more of your costs renovating a kitchen or bathroom than any other part of your home. In addition, an improvement to these two areas usually actually increases the value of your home.
According to the Appraisal Institute of Canada, a home owner can expect to recover 73% of the cost of a kitchen renovation in resale, and 71% of the cost of bathroom renovations. Painting, both exterior and interior, as well as landscaping, yield good returns of up to 60%.
Surprisingly, swimming pools and home offices are the worst renovations to consider in terms of increasing market value and recouping renovation costs. The return for each is no more than 20% at resale.
If you plan to renovate, remember that you will never recoup the full cost of renovation. If you spend $10,000 to redo your kitchen it doesn't mean the value of your home has suddenly increased by $10,000.
Home owners need to consider the neighbourhood, complex or environment before remodeling, especially with strata complexes. No matter how beautiful the interior, if a strata's common property is in disrepair or poorly maintained, the home will not increase in value. The same applies to detached homes - it will not pay to have the nicest home on the worst street. You're better off having the worst home on the nicest street.
The key is to keep renovations simple and tasteful. Designers recommend using neutral colours and the most natural products.
More and more buyers are looking for natural, hardwood floors, for example, and other natural products that last a lifetime.
If you are thinking of buying or selling real estate in
Vancouver, please contact Mitchell.
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