Let’s take a handful of the most persistent ones head on, and decipher which of them are fact, and which are fiction.
Rule of Thumb #1: Location, location, location.
Location impacts whether you hear train tracks or birdsong in the morning, whether your neighbors bring you cookies or bring you drama when you move in - it can even impact your career and job prospects. The deep, numerous impacts of where we live on our experience of a home, in turn, give location a powerful role in driving whether we can resell our homes - and for how much.
The critical importance of location is one real estate rule of thumb that grows more true over time. However, the specifics of what makes a location desirable have and continue to evolve rapidly. For example, urban homes with super-short commutes to bustling job centers have grown more and more interesting to buyers as their prices have come down and gas prices have gone up.
Rule of Thumb #2: It costs more to buy than to rent your home.
But the age-old would-be buyer objecion that “I can’t afford to buy a home” is now frequently shattered by the reality that when you take all things into account, buying a home at today’s prices and interest rates can actually cost the same or less than renting at today’s relatively high rental costs in many areas.
That said, if you live in San Francisco or New York City, chances are good that it does actually cost more to buy than to rent. But if you live elsewhere, it behooves you to actually do the math, factor in the massive tax advantages of homeownership and see which is truly more expensive for you. And make sure your decision accounts for the massive opportunity costs you might incur if you don’t take advantage of today’s prices and rates to buy a home of your own and start building equity - something you can simply never do as a tenant.
Rule of Thumb #3: List it high, to give yourself bargaining room.
There are simply too many other great homes at great prices on the market. Overpriced listings are much more likely to be a source of prolonged stress and handwringing to their owners than a source of successful sales.
If you're tempted to list your home high, there’s something else you need to be aware of: the sweet spot phenomenon. Homes that are listed too high sometimes go through one, maybe even several, price cuts before they hit a sweet spot - the price at which buyers are drawn to the value like moths to a flame, sometimes even generating multiple offers over the discounted price (but below the original list price). Here’s some good news: you don’t have to wait months and months and go through the agony of showing upon showing and price cut upon price cut to get your home’s list price to the sweet spot where it sells.
Work with a local agent who has a strong, recent track record of selling homes, quickly and at or near their list prices, in your area. Then, trust their pricing advice. (You might find it easier to trust them if you select your agent after speaking with several.) It’s the most efficient way to leverage local market expertise to get to your home’s pricing sweet spot, quickly and with minimum drama.
Rule of Thumb #4: Always offer 10% below the asking price.
And at the end of all that, buyers often still feel like the final decision about exactly how many dollars and cents to offer for their home amounts to something like licking their finger, sticking it into the wind, and just picking a number. And that just seems wrong, for a decision so important.
So it’s no wonder that one of the most frequently asked questions I personally receive is the request for the perfect rule of thumb of how much below asking a buyer should offer, given today’s market dynamics. My answer is now what it always has been and will be: sorry folks - move along - no rule of thumb to see here.
Every state, county, city and neighborhood has a different dynamic - as does every listing. Every seller, bank or individual, has its own particular motivations, situational constraints or influences (like how much they owe on the home, or the need to split proceeds between divorcing or sibling co-owners) and thought processes. If the seller feels they listed the place at an uber-low price, they might respond very differently to a particular offer than a seller who gets the same offer, but felt like they were building cushion into the list price. If the home is in a neighborhood where most homes sell for more than the asking price, or the property has multiple buyers vyying for it, even a full-price offer might get laughed at.
Long story short - the specifics of each listing’s situation absolutely must be taken into account when deciding how much to offer, along with the comparable sales data and the buyer’s own (a) financial concerns and (b) motivation level for getting the home.
Rule of Thumb #5: Listing your home as a FSBO will save you some dough.
The fact is, listing your home for sale by owner might save you the commission you would otherwise have paid to a listing agent. But the FSBO sellers who are successful generally do offer to pay the buyer’s broker’s commission, so the prospect of saving the full 5 or 6 percent agent commissions is more realistically the prospect of saving 2.5 or 3 percent.
Beyond that, the smartest FSBO sellers also often end up:
- paying a limited service broker to list the property on MLS,
- paying for professional staging or investing in some level of property preparation, even if they do the labor themselves, and
- paying for an attorney to assist them with the disclosures and contracts involved in the sale --
Fact is, many sellers who don’t hire an agent, but do cobble together a similar level of professional services and account for their own time spent on a FSBO listing, soon see that they’re not actually saving much money at all. And even those who think they can save soon see that there’s no savings if the house doesn’t sell - a common fate of FSBO’s on today’s market.
Sellers who already have in hand a buyer who is ready, willing and qualified to buy their home are the best suited for selling by owner, with the help of legal, title and escrow professionals, in my opinion. Most others should at least talk to several agents, discuss whether there’s any flexibility on commissions and be honest with themselves about what the prospect of marketing, preparing and selling the home DIY would really look like, before assuming that they’ll save a ton of dough by listing it FSBO.