When the time comes to put our primary house up for sale in a few years before a long anticipated move south, we will be tempted to list the house ourselves. I hope we are strong enough not to give in to the temptation. For sale by owner is a fool's paradise.
There are too many psychological traps in the pricing of a home. In our case, we have lived in our Connecticut house for 15 years. We've raised two children there, spent uncalculated thousands on landscaping and other home improvements, and we built a kitchen my wife designed that literally changed our lifestyle by elevating our joy of cooking, entertaining and, of course, eating. We have invested a lot in the house, financially and emotionally. For the right family, we think our home is worth $1 million.
But the truth is, at that price our house would sit on the market until the next housing boom, which may come when I am in a nursing home. Our house is worth only what someone else will pay for it, and we are worse judges of its true value than is the guy who cuts our lawn. Especially in a tough sellers market, pricing a house too low will wind up costing way more than the savings of cutting out the middleman. (Note: If this were a strong sellers' market, I could be writing an entirely different column.)
I did a little test this morning after picking up a booklet with a listing of homes for sale by owner. I compared those listings with listings by realtors representing clients selling the same sized homes in the same neighborhoods. Of course, you cannot know the condition of the properties, the views, and other nuances from four or five lines of agate copy, but I figured the comparisons would give me some anecdotal evidence to confirm my suspicion that owners factor in their commission savings when pricing their homes.
My assumption was wrong. In virtually every instance where I could find homes of similar sizes in the same neighborhoods, the price listed by owner was the same or higher than all others. At the International Club in Murrells Inlet, SC, for example, an owner is offering a small 3 bedroom, 2 bath home for $218,000. The listing by a realtor for the same size house down the street is $219,000. A 3 bedroom, 2 bath condo adjacent to the True Blue Golf Club, a dramatically scaled course by Mike Strantz in Pawleys Island, is listed by the owner at $270,000. The same sized condo was advertised by a realtor in the real estate section of Sunday's paper for $245,000. In the half dozen other comparables I found, the owners' prices were higher than the realtors'.
It is hard to pay a 5% or 6% real estate commission, and the $25,000 savings on a $500,000 sale can purchase a lot of newspaper advertising. You can even rent a billboard for a few months for $25,000. Try asking your real estate broker to advertise your home on a billboard.
But the marketing is irrelevant if the pricing is wrong. Pricing is more important than ever in today's market. A home overpriced from the gitgo will languish, and later price decreases still might not be enough to catch up with comparable homes that were priced right from the start. Readers of this site know we are no shills for the real estate industry (although some of my best friends are realtors, and I know they provide many more important services than simply determining the right price). But when it comes to selling your house, we defer to the warning you see so often on television: Do not attempt this at home.
