For almost all people the sale of a house can be the single largest and consequently most nerve-racking event in their lives. Naturally, they want to receive the highest possible price. Here are some ways to optimize the sale price of a house.
• FSBO: For sale by owner. Many sellers look at the substantial fee charged by real estate agents and decide to "sell by owner." This is a good idea if it works and you will know the outcome in a relatively short period of time. Selling by owner tends to be more successful in communities with a great deal of similar housing and less so in the more complex higher end markets. If you decide on this approach, gather the information you need to price the property, be prepared to negotiate, have your lawyer lined up, have a contract ready for the buyers, put together a professional fact sheet about your property, put up your sign and advertise in the local papers. But be careful. No agent is screening the people whom your ads may bring to your home. Generally it is a good idea to make your FSBO exposure brief. Usually the cream rises to the top quickly. If you get a quite healthy stream of interested parties in the first week or two and start to get some offers, great. If not find the best local, most experienced agent in the market to represent you -- not a friend. Ask around. Your banker or an appraiser will know the best brokers. Interview those that sound promising. Ask them how they would market your house. Their access to the MLS (Multiple Listing Service) should bring you substantially more viewings than your FSBO efforts could. Furthermore, their expertise should get you through difficulties in the sale which you might not be able to handle yourself. A tip: ask agents to call you with the name of a good plumber or house painter. Those who don’t get back to you may be too busy to do a good job marketing your property.
• PRICING: Whether you sell by owner or through an agent, the asking price should be about 5-10% more than the market indicates. This gives you some room to negotiate. The question is, of course, what is the market value? There are several sources for this information. Local real estate professionals, both appraisers and agents, are excellent sources for such information. Agents will provide you with a "free" market analysis and tell you what list price should be. Of course, they want your business. Are they going to give you an honest opinion? Generally the answer is yes if you deal with well-respected firms. A few firms will "buy your business" with a number that is too high. A few others may low ball to get a quick fee. Be aware that even if you decide to sell by owner, you can still ask agents to bring a group from their office to walk through your house and price the property. Tell them you plan to turn the property over to an agent if it does not sell by owner. Pricing is, of course, what appraisers do and we charge for this service. The charge is modest and depends on appraisal complexity. The law requires that appraisers be neutral and unbiased in their opinions.
• DON'T GET GREEDY: Many people price their homes too high and end up with less than they would have had if they listed it at the right price from the start. They suffer from the dread homeowners’ disease "owneritis," a financial disease which overtakes some homeowners who are convinced that their home is so special that the market will pay a substantial premium for it. They ask too much for their home, reject a decent offer soon after listing, the house stagnates on the market and eventually someone buys it for less than it would have sold for had it been priced correctly in the first place. Another problem arises when homeowners assume that the price of their house will rise with the market. This is only true with an average or better-than-average home. The problem arises when the home is less than perfect. For example, it might lie on a busy street or have only two bedrooms in a town where three or four are common. Don’t be surprised if the price of such homes does not match the market.
• UPDATES AND ADDITIONS: Add major additions or updates when you move in, not in order to sell faster or at a higher price when you move out. Almost no major expenditure returns one hundred cents on the dollar. However, some are better than others. Kitchen and bath updating and inexpensive corrections of serious flaws seem to have the best return. Basement and third floor additions appear to be the worst investments from the standpoint of market return. That does not mean that they might not be right for you, only that the market will not pay as much for them. A Winnetka family bought a smaller ranch home on a flag shaped lot on one of Winnetka’s most prestigious streets. As it was in the flood zone, they could not have a basement. These characteristics limited the value of the second floor addition as typical buyers in this market expect a lot which opens to the street and they want a basement for the children to play in and for storage. Ann O’Rourke, publisher of the Appraisal Today newsletter (www.appraisaltoday.com), suggests that the difference between the cost and the value of additions be viewed prior to construction as investments and should be amortized over the length of time you expect to own a house. That seems like very sound advice. For example, if the cost in Kenilworth of the two story 800sf dream addition of a new kitchen, master bedroom and master bath is $100,000 but the market will only pay an additional $75,000 for that addition, the non recoverable expense is $25,000. If you plan to be in the house an additional ten years, is it worth $2,500 per year for you to have the addition? A doctor on the grounds of Indian Hill Country Club asked for an appraisal of his estate-sized property with a proposed addition. The appraisal was done from plans and specs. He had recently paid $1,450,000 for the 1927 home on an acre of land. His plan would have cost $900,000. The appraisal came in at $2,050,000. Based on the knowledge he gained from the appraisal, he scaled back his plan substantially.
• INEXPENSIVE IMPROVEMENTS: Money spent on cosmetic changes will often help with the sale of a house. There are some simple things that can be done such as painting and minor repairs. Change vivid wall colors to neutral ones. Many buyers can not see through the bright purple wall in the living room to the more sedate colors they would like to have. An east Lake Forest house did not sell for some time because the owner, an artist, had painted an Italian scene on the living room wall. It was well-done but it stopped people in their tracks. They lost sight of the wonderful features of the house because they only remembered the living room fresco. Have someone you trust give you an independent view of your home. Ask an appraiser or a broker if the house looks cluttered or if any colors are too bright. Some may see bright colors as gaudy. Listen to their answers. The broker may be a bit more reticent than the appraiser as he or she wants your listing and may be concerned about offending you. Get rid of all junk and even your collected prized possessions, if they tend to make the rooms look small. Get rid of your real treasures if they might overwhelm buyers. An acquaintance recently sold a 1,800sf ranch style home in Winnetka. They had lived overseas and the house had a lot of interesting things in it. However, they rented and filled a storage locker with things from their home in order to make it look larger. Keep the house clean every minute it is on the market! A buyer may need to see it in the next five minutes.
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