Losing Money by Trying to Save Money
Everyone wants to sell their home for as much as they can. The principles are pretty straightforward, as I’ve laid out in many posts on this blog, but that doesn’t stop people from trying to cheat the system and then cheating themselves instead. DIY isn’t necessarily a bad thing, but be honest with yourself about your knowledge level of renovation, real estate markets and finances. There is no shame in asking a pro.
The examples below are facepalm moments, which is why I choose them to illustrate my point. The stories are from my own experiences and the photos are things I’ve found online. I have arranged them into categories to make the points I’m trying to make more clear.
For Sale By Owner/Discount Brokerage
I’ve illustrated the typical effects of these approaches in my tongue in cheek story about “The House That Wouldn’t Sell” but the short of it is that if you are not paying Realtors for their work then how do expect to attract the Buyers that are working with them? The Buyers are with the Realtors because they have the info, tools, network and experience they need. The only reason they are likely to go to you over a conventional listing is because they are going to save a big chunk of money, which means you have to list significantly lower which in turn nixes any commission savings and greatly increases chances of you spinning your wheels a lot or having something go horribly wrong that ends in a courtroom.
There is a minefield of legal risks you are trying to navigate without proper hands on guidance. It’s just too much to get into here as writing about that properly would be textbook length and require Lawyers to proofread my descriptions. Suffice to say it’s good to have a professional navigating that minefield for you and you get what you pay for.
I also go into the in the story I link to above and I have written about it so much in this blog that I won’t go into it here beyond saying that it’s a fallacy to think that asking more will get you more. If your price is too high it will get you ignored and quickly forgotten by the Realtors who would be suggesting that their clients come see it. The Buyers will see it on whatever MLS system they are using (usually a custom one set up by their Realtor) and they only want good deals anyway so why would they bother with something they can tell is overpriced? Maybe the listing is advertised prominently in newspapers, websites and a myriad of other ways. Buyers don’t care. They want the best deal. This isn’t impulse buying like a can of pop, dinner out or the latest tech gadget. This is the biggest financial transaction of their life and they are not going to buy something until they have really had a good around. (I know, you’ve heard a story about people buying the first place they looked at without looking around. I’ve heard that story too. Never seen it, and if I did I would still be like “Are you sure?” because it’s not good business sense to sell someone something they regret buying.)
By the time you fix the price a few weeks, or worse yet months, later that “new listing” sparkle is gone and the sense of urgency that attracts solid offers from Buyers is gone with it. In the end, neither you or I or any one person decides what your property is worth. The market decides what it’s worth. You get to decide if what the market has to offer it worth it to you.
Disclaimer: There have been times when I’ve suggested listing a property a bit higher than it is probably worth with plans for price reductions until we find the right price due to certain factors regarding the property. But those exceptions are very rare. So rare, in fact, that when I suggest it I feel a twinge of anxiety because it is the opposite of what I am trying so hard to recommend to Sellers who are letting their biases and love of the property get the best of them.
Next are some links to some of the other times I have brought this up on this blog. I’ve written about it a lot because it is really important for clients to understand and there is generally a lot of resistance to accepting it, which is understandable but in order to get the most out of their sale it is in the Seller’s best interests to come to terms with it.
Bad reno choices
This is where my post gets less preachy and more entertaining. I’ve seen some wacky stuff. It’s kind of sad a lot of the time but it also fascinates me how people’s minds work when they are trying to save a couple of bucks. Most of the time when I see these kinds of things I think “Oh man…. what did you do here…” and sometimes things are so crazy I can’t help but giggle and shake my head.
The vast majority of oddball fixes can be remedied with varying amounts of time and budget but quite simply the “Why?” factor is strong enough to turn away Buyers as one starts to wonder what other maintenance oddities are yet undiscovered with the property. DIY can be a good thing, but be realistic about what your skill level is. People often lose more money than they save.
Boefore I wrap up with some entertaining images here I just want to say that the takeaway point I am going for on this post is “It’s wiser to pay a little more to have it done correctly than to pay less do have it done incorrectly. It will most likely come back to haunt you.” This can be applied to many areas of life but when it comes to real estate the effect comes with more zeros at the end.
To be clear, not each image below is necessarily someone trying to add value with an oddball fix but each image is definitely in the realm of not spending a couple of bucks because they ‘needed to save money’ when in fact the act of not doing so is enough to devalue the home, likely substantially thus having the opposite effect of saving money: