Month: August 2020

When a house has been sitting on the market for too long, the price begins to drop. Buyers will think there’s a reason that no one is buying it, and they won’t add it to their list of houses they want to see. In fact, web traffic to a listing slows down by 65% after the first three days, according to a study from Redfin. 

That’s why it’s so important to make a good first impression with your listing price. If a house is overpriced, buyers won’t give it a second thought. But you don’t want to set the price too low and lose money either. Here are a few tips to help you find the right price for your home. 

Don’t Drop The Price

A home that comes on the market at $249,000 looks a lot different than one that was on the market for $350,000 for a while before being reduced to $250,000. Buyers will question why the seller dropped the price so much. Were they trying to trick buyers into paying more than the property is really worth? Does the seller know what the actual price should be? Will the seller drop the price even lower if buyers wait? 

Lowering your price might attract some buyers, but not nearly as many as if you had just set that price, to begin with. In fact, houses that have price drops only get about half as many views online as new listings, according to Redfin.

“Even if it’s objectively a good home, if it’s been on the market for a while, many buyers will wonder if there’s something wrong with it. Once that stigma is there, it is going to be hard for a seller to get full asking price,” a Redfin agent said in the study. “If there’s already a price cut, savvy buyers start smelling blood in the water. It’s not a good situation for sellers to be in.”

Think of it this way: if you are willing to reduce the price after it’s been sitting on the market for a certain number of days, just make that reduced price the initial price. Buyers have a lot of tools available to them these days, and they can see when you are overinflating the price of a house. 

Start A Bidding War

On the other hand, if a home comes on the market at a low enough price, it can attract more buyers. Those buyers might grow attached to the property and start a bidding war. In the best-case scenario, buyers can actually increase the price of a home beyond what you ever thought you could get out of it. 

However, setting the price below what you are comfortable selling it at could come back to bite you if you end up losing money on the sale. So make sure you feel comfortable with the price you set. 

Leave Some Wiggle Room

Most buyers will want to negotiate the price even if they are already comfortable with where it is now. If you set the price $5,000 – $10,000 higher than you want to go, you can allow the buyer to “win one,” which goes a long way. 

Think of it this way: would you rather buy a house that was priced at $250,000 and you were able to haggle the price down to $240,000, or a house that was originally priced at $240,000? Even though both houses turned out to be the same price, most people would feel like they saved money by haggling, even if it’s only a small percentage of the final sale price. 

Price For Search Ranges

Many buyers shop for houses online or through apps that allow them to set a price range. So they won’t be able to see houses that are just out of their range, even if it’s only by one dollar. That’s why it’s important to set your price within common ranges. Most of the time these ranges are between big round numbers, like $100,000 – $200,000, or $250,000 – $299,999. You’ll only be shooting yourself in the foot by setting your price at $301,000 instead of $299,000. 

Setting your price below one of these big round numbers puts you in a buyer’s price range, plus it makes the price seem a lot lower than it actually is. There’s a reason songs on iTunes are only 99 cents, it’s easy to justify spending less than a dollar on a song (even if it’s only a penny less than a dollar). 

Talk To A Real Estate Agent

The best way to find the true market value of your house is by simply asking a real estate agent. They know the market conditions and how much buyers will be willing to spend on your house. Even if you’re not fully sure you want to sell yet, you can call up your local realtor and ask them how much your house would be worth if you did decide to put it on the market. You might be surprised how much they say your home is worth. 

Imagine saving for a home downpayment for years, then working to pay off a mortgage, only to have the home burned down in a fire. How would you be able to get your life back to normal? 

The most common type of homeowner’s insurance (HO-3) protects you in case your home or belongings are damaged, stolen, or destroyed by fire, hurricane, hail, lightning, and all other disasters that are not specifically excluded in the policy.

Most mortgage companies require borrowers to have insurance coverage for the value of their house when they buy a home. While an insurer may recommend a coverage limit for your home, it is a good idea to familiarize yourself with what homeowner insurance covers, and how much coverage you should have. 

Dwelling Coverage

In the event that your home is totally destroyed by a fire, you want to make sure your dwelling coverage is enough to pay for all the costs associated with rebuilding your house from the ground up (this is not the same as the price that you paid for the property). 

To calculate how much it would take to rebuild your house, multiply the square footage of your home with the local construction costs. You can find this information on the websites of most construction companies or by asking your real estate agent. You would also have to include any attached structures, such as a deck, built-in appliances, like a water heater, and any improvements you make to the house, such as new floors or marble countertops. 

Keep in mind, the cost of rebuilding your home will be higher if you are rebuilding at a time when construction costs are high. If your whole neighborhood was hit by a massive fire, and all your neighbors are all rebuilding at the same time, it could drive construction costs up a lot. 

Personal Property Coverage

Most homeowner insurance policies also cover personal belongings both inside and outside the home, such as furniture, computers, appliances, clothing, and other belongings that have been stolen or destroyed (except your car). You want enough personal property coverage to replace all of your belongings in case they are stolen or destroyed. 

Generally, insurance companies will set the default personal property coverage limit at 50-75% of your dwelling coverage, but the amount of coverage you need depends on how much stuff you have and how valuable it is. The best way to accurately assess the value of your property is to take a home inventory. There are many apps that allow you to take a detailed inventory of your things, along with notes about their value. Having a regularly-updated inventory will make it much easier when you submit a claim to the insurance company. 

TIP: It is easy to take an inventory of your things while you are packing them up before you move. 

Liability Coverage 

Personal liability coverage will pay for any legal and medical bills that occur if someone gets hurt on your property. So if your dog bites the neighbor, your insurer will pay any of their medical expenses. Also, most insurance companies will pay your medical expenses if your neighbor’s dog bites you, so make sure to ask your insurer what they cover. 

While most insurance companies will provide a minimum of $100,000 worth of liability coverage, experts at the Insurance Information Institute recommends that homeowners purchase at least $300,00 – $500,000 worth of liability coverage. 

Additional Living Expenses Coverage

If your house burns down, you are going to need a place to live while you are rebuilding it, that’s where additional living expense insurance (ALE) comes in.  ALE covers hotel bills, restaurant meals, and other living expenses you may incur while you are not able to move back into your house. 

Supplemental Insurance

A standard insurance policy will not pay for damages caused by a flood, earthquake, or routine wear and tear. In order to get coverage to protect against these and other damages, you may have to get supplemental insurance. 

If you are unsure of how much homeowners insurance to buy, talk with insurance companies, mortgage lenders, and real estate agents. They can help you get the proper coverage to protect you, your belongings, and your house from whatever life throws at you.