Real Estate Advisor: June

The Dangers of an Unreasonable Asking Price

One of the most common and costly mistakes made by sellers is setting an unrealistically high asking price. Every seller wants to receive the highest closing price possible for their house, but losing sight of fair market value can have serious repercussions.

In some cases a lack of objectivity results in overpricing the home, other sellers may subscribe to the theory that pricing high initially leaves room to negotiate lower later. Overpricing from the outset could actually force you to end up settling for a lower price than you would have received by setting a realistic asking price based on market research.

Common Results of Overpricing

Fewer “Eyes” on Your Listing – Mispricing your home can prevent it from ever being seen by a certain percentage of potential buyers who might otherwise be interested in your home. Savvy buyers today research the local market even before acquiring an agent. Buyers will search available listings both online and offline in real estate publications, and in most cases they will set a price range to limit the listings they review. If your home is outside of their range even by a few thousand dollars, it may not be on the buyer’s radar.

Most buyers will then hire a specialized buyer’s agent, and together they will develop a strategy to evaluate homes that match the buyer’s needs within their acceptable price range. Occasionally an agent will provide information on a home above the buyer’s maximum price point, but rarely will they stray too far above that boundary.

Lack of Showings – Agents who work with homebuyers will know local market conditions and the listing prices of comparable homes. If they feel your home is overpriced, they will be reluctant to show your home to their clients for fear of wasting their time.

Helping Competing Listings – It may not be your first thought, but overpricing for your home for the market can actually help the competition. Your home’s higher asking price will make other nearby homes of equivalent size and quality look like steals in comparison. Astute selling agents for other properties will use the price gap between your home and their own as a further selling point of their listings.

Stagnation and Stigmatization – If your home is priced higher than what buyers in your market are willing to pay, it runs the risk of sitting on the market for a longer period. The longer your home sits on the market, the more likely it will become stigmatized as “overpriced” in the real estate community. Once that happens, removing the stigma and restoring interest in your home can be a difficult task. Even dropping the price later will not have the same level of impact as the initial, negative, impression of your listing.

Tough Negotiations – A high listing price can be a warning flag that buyers use for leverage during the negotiation process. If the asking price seems high without home improvements or features to warrant the difference, buyers may assume that you are either A) not well informed about the market, B) not a highly motivated seller, C) have a need for money (perhaps forced by a move to a higher-priced area), or D) are simply creating some bargaining room. If the buyer believes any of these, they are likely to fish to determine how low of a price you will accept.

On the other hand, if your home has languished on the market as a result of a high price, buyers may believe you are becoming desperate. Interested buyers will make lower offers as a result.

Appraisal Problems – Should you be fortunate enough to find a motivated buyer willing to pay your overestimated asking price, you still run the risk of having the deal fall apart prior to closing. Most buyers will use some kind of financing to pay for their home purchase, and every lender requires an appraisal of your home’s value.

The appraiser will review your home in person to assess its value based on similar homes that have sold (usually within the last six months). If the appraised value is below the agreed selling price, the lender will only approve a loan for the lower amount. You may be forced to reduce the selling price or risk having the deal collapse, and your home return to the open market.

Overpricing and Today’s Market

Today the tendency to overprice relative to the current market can be even more tempting. Home prices have dropped since the high peaks in the summer of 2006, and as a result many are in denial about the current market value of their home. Homeowners who bought within the past five or six years in particularly may be overly influenced by the purchase price they paid during the real estate boom.

This comes at time when overpricing couldn’t be a worse strategy. There is a smaller pool of highly motivated buyers, and today’s buyers tend to be well educated about the market. Without the assumption of price appreciation, few buyers are willing to gamble and overpay for a home. In addition, credit tightening has reduced both the number of buyers who can qualify for a mortgage as well as the size of the mortgages available.

Creating a Pricing Plan

When pricing your home, the best strategy is to remain objective and compare your home closely to similar properties on the market. Take the opportunity to visit open houses and pay attention to recent sales in your area. Are you more focused on selling quickly, or on receiving the highest possible selling price? Is the price you have in mind reasonable when compared with what other homes are asking for and selling for?

Priced Too High: Corrections

If your home has been sitting on the market with few offers or showings to its name, consider whether or not it is priced correctly. Review recent sales of comparable listings, especially those that have sold since your home went on the market. Another method is to ask agents who have shown your property for feedback they received from their clients. Have buyers who looked at your home in person purchased other homes in the area instead?

Acting quickly to adjust the asking price is the best way to keep as much of your marketing momentum as possible. Depending on how long your listing has been on the market, additional marketing may be needed to help repair some of the “damage” done to the reputation of your home’s listing at the higher price. In some cases, you may be forced to slightly under price your listing to create additional interest.

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Real  Estate Advisor: May

Moving Companies: What You Need to Know

Arranging the move to a new home requires dozens of arrangements – particularly in the case of a long distance move. Hiring a professional moving company can save you both effort and time. Moving companies can provide a variety of services for a range of fees, and in many cases leaving the actual move to the professional can free you and your family up to focus on other details.

Picking the Right Mover

Choosing a moving company who will transport your possessions both carefully and swiftly can be something of a daunting task. The tips below can help you find a quality moving company while weeding out some of the less than trustworthy candidates.

Only Accept Visual Estimates – It’s nearly impossible for a mover to offer an accurate cost estimate on the transportation of your things without completing a detailed inventory of your house in person. Only get quotes from companies willing to review what needs to be moved before providing an estimate. You should also accompany each moving company’s representative on their walk-through to make sure the inventory is thorough.

Price Shop – While it may be tempting to go with the first company that you like, obtaining multiple quotes is the best way to assess the market rates for the service.

Avoid Dramatically Lower Offers – Shopping three or more price estimates is also a good way of identifying a company who is providing a “low-ball” quote. Companies whose quote a price far below the median are more likely to either provide a final bill far above the initial (inaccurate) or tack on arbitrary fees that will result in an unexpectedly high final total.

Avoid Movers who Promise a Precise Delivery Date – Most moving companies will provide you a delivery window during which your items will reach their destination. Any company that promises to deliver everything at a prĂ©cised date and or time should raise your suspicion. Moving companies provide delivery windows specifically because precise delivery dates are often beyond the control of the movers themselves, especially in the case of long-distance moves.

Check for Proper Licensing – You always want to make sure that the moving company you’ve chosen is properly licensed and has a strong safety record. Intrastate moving companies are required to be licensed through the Department of Transportation. If you’re moving in-state, you will want to check with local or state authorities to verify the mover’s licensing.

Check for Numerous Complaints – Asking for testimonials from past clients can provide some insight, but the best way to avoid hiring a moving company you will regret is to check the Better Business Bureau for any sign of numerous (unresolved) complaints about the mover.

Questions to Ask a Moving Company

  • -How long have they been in business?
  • How are move estimates priced?
  • What extra charges may come into play?
  • Does the company have any repeat clients or references of business moves?
  • How do they handle expensive or challenging items such as a pool table or grandfather clock?

Common Moving Costs

A professional moving company can save you time and keep your back muscles in working condition, albeit at a financial cost. Here are some of the most common charges levied by movers.

Packing Materials – Regardless of whether you are boxing everything up yourself or having the movers pack for you, boxes of various sizes, bubble wrap, packing tape and loose packing fill will all need to be purchased. If you rely on the moving company to pack boxes, they will charge top dollar for packing materials (sometimes double retail value). Movers may also impose an additional packing fee.

Self-packing all items is one way to save money. Remember that movers usually won’t load anything that is not already boxed and well-taped, so buy extra boxes and rolls of packing tape for a precaution on moving day.

“Line-Haul” Charge – This is the base charge for the transportation portion of your move. Line haul charges are based on the distance of the move and the quantity of moved items (determined either by weight or cubic space occupied).

“Long-Carry” Charge – The “Long Carry” is an additional charge allotted if there is an excessive walking distance between your home and the mover’s vehicle. .

“Stair” Charge – Similar to the “Long Carry” charge, most movers will add an extra fee if they are required to haul your furniture and boxes up or down an excessive amount of stairs. Some movers will charge any stairs in place (by the flight).

Third Party Charges – Many services involved in a move are not handled by the moving company directly, in which case the movers will pass the charges from third-party companies on to you (typically without markup). Examples of third-party charges include appliance servicing (disconnecting &hookup), disassembly/assembly of exercise equipment or playground furniture/equipment and the crating of fine/fragile items.

Insurance Surcharge – The moving industry faces high costs for trucking insurance. Insurance surcharges help the moving company off-set some of the trucking insurance costs they pay on the truck(s) that actually transport your goods and furniture. Note that an insurance surcharge does not offer protection against the loss or damage of your goods.

Valuation Charge & Supplemental Insurance – The valuation charge compensates the mover for assuming liability of your goods during transportation. Moving companies are required by law to have a minimum protection, and federal law requires interstate movers to offer you the option between two different levels of liability (learn more here). Some movers may also offer to sell or obtain for you separate liability insurance on top of basic valuation coverage.