Richard Dolan, president of the Real Estate Investment Network (REIN) recently sold his own home and became reacquainted with the anxiety and pressure of the process. Topping his list of ten mistakes is trying to sell on your own without using a real estate professional.
Closely related is setting a wrong listing price. “Understand your market. Research your neighborhood for selling prices and sold-for prices,” Dolan says, “Also, do some comparables; what are other homes given the features and benefits of your home selling for comparably?”
Mispricing in either direction is more likely if you try to save on commissions by going the FSBO route (For Sale By Owner). Mispricing can also occur when you let emotions rule your decision of what price to ask. Many prospective home sellers have a magic number in mind of the ideal selling price of their home. For example, if you bought a $300,000 home and the market has dropped 10% since the original purpose, the fact you “need” to clear $300,000 after all expenses is irrelevant.
Russell Westcott, also of REIN and co-author of 97 Tips For Canadian Real Estate Investors, says the latter mistake is caused by wearing rose-colored glasses. “No one cares about how much you paid for it or how much money you put into it. Price your property based upon what the market will pay.”
Get a professional appraiser to assess the value of your home before coming up with your asking price. Assume prospective buyers have done their research and have a good handle on home prices in your neighborhood.
It’s also a mistake to think your ego is your amigo, Westcott says. “You may have raised your family and spent years of sweat equity to make your house perfect but it’s NOT your house anymore. Make your home appealing to your buyers instead, so they can envision themselves in it.”
Other mistakes? Failing to take care of important repairs prior to listing is a biggie, Dolan says. So is failing to de-clutter and removing junk. However, don’t go to the opposite extreme: selling your house bare. “You should ‘stage’ the house with just the essentials so people can see themselves in the home doing the normal things that comes with living in a home.” Since 90% of buyers start their search online, using poor photographs can also be a mistake.
Jon Ingall, a Toronto-based real estate agent with Re/Max, says the most common mistake he sees sellers make is not having their next move’s “where and when” planned and committed to properly. “You have worked far too hard to become homeless, even if only for a few weeks, so you should be prepared to buy your next home before putting the For Sale sign on your lawn. The low interest rates right now make bridge financing fairly inexpensive and somewhat more palatable than the anxiety of not having a home to go to.”
Timing here is critical, Ingall says: “Your existing home should be going on the market in the same week as you make your purchase, so you are buying and selling in the same market.”
Timing also applies to the broader real estate cycle.
If the advice “buy-low, sell-high” applies to the stock market, it’s doubly applicable to residential housing. Memories are short but remember the financial crisis of 2007-2009 was largely triggered by a mania in housing prices in the U.S., when buyers leveraged themselves on multiple properties in order to take advantage of low interest rates, all in the mistaken belief that home prices can only rise.
Canada’s housing market has remained remarkably buoyant, despite warnings by The Economist magazine that our market is significantly overpriced. But just as stock-market investors believe it’s a mistake to “time” the market and that they should instead remain fully invested, so too do I think it’s a mistake NOT to enter the housing market because it’s considered too frothy.
Because I believe the foundation of financial independence is a paid-for home, I’d say it’s a bigger mistake not to get in the market in the first place. After all, you can’t sell a house if you don’t first buy one!