Price is the No. 1 factor that helps potential homebuyers determine which homes they want to view. The right price should attract buyers, allow you to earn the most money possible and help you sell as quickly as possible. However, there is an art and a science to setting asking prices, and many sellers tend to overvalue their homes based on two common factors—the original cost of the property and the cost of home improvements.
- The original cost of the property does not determine your asking price. Price is determined by today’s market, not by the market in which you purchased your home. Buyers won’t be swayed to pay more for a property just because you paid a lot initially.
- Home improvements do not necessarily increase your asking price. Improvements can add value to your home, but not all improvements add value equal to what you spent on them. What you saw as an upgrade could be seen by a buyer as a potential future cost. For example, just because you spent $20,000 installing a state-of-the art swimming pool doesn’t mean your home’s selling price will be $20,000 more. This goes for all upgrades. A $7,000 kitchen upgrade doesn’t mean $7,000 should be added to the asking price. Consider this before spending money to upgrade or update any part of a home you plan to sell.
Try to avoid allowing your enthusiasm to impact your better judgment—overpricing is a common mistake that can cost you in the end. If your home is priced too high, you may help sell similar homes in your area that are priced lower, rather than selling your own. Because your home would likely stay on the market longer, you could lose market interest as well as qualified buyers. And the longer your home is on the market, the more likely it is you’ll lose money as a result of making extra mortgage payments, incurring taxes and paying unplanned maintenance costs.