The Top Four REAL Costs Incurred from Incorrectly Pricing Your Home

As REALTORS®, we’re asked, “What’s my (or that) home worth?”

It’s a great question. How DO we value homes? There are some correct ways, and many MORE incorrect ways. That’s why it’s SO important to choose the right REALTOR®!

Over the next three blogs we’ll review:

· The top four costs incurred from incorrectly pricing your home

· The top ten ways to incorrectly value your home

· The top five ways to correctly value your home

We hope this mini-series provides some insights.

Let me first ask a question: when listing your home, how many times have you said to your friends about REALTORS® you interviewed, “They just wanted to price the home…JUST TO SELL IT!”?

If you reacted sympathetically to that statement, re-read it and then think for a minute: REALTORS® just want to price a home to sell it.

Heaven FORBID !!! Pricing a home to sell?!?! What’s next?!?!? Helping you find a home you actually want to BUY?!?!?


You want to move, not operate a museum or tourist attraction. Right? You aren’t charging admission. Right? I know that sounds a bit over the top, but the hyperbole is meant to point out some serious issues.

Listen, everybody says it. I have! And I AM A REALTOR®!! Even my dad, who still brags about it from…1976!!

Mind you, I had an automobile accident in college and a divorce since…those never get mentioned. However, the home price and what the REALTORS® back then told him…he remembers. I love him to pieces, but I just don’t have the heart to tell him why he is wrong. By the way, he and mom also rocked the avocado and maize appliances, wrought iron, and interspersed cork and smoky, veined mirrors on an accent wall. I wonder if he would mind if I reminded him of those, too?!

REALTORS® want to price your home to sell? Why, because there are lots of costs which get incurred in the sale transaction when you start that clock that you may not realize you pay. We want to help you avoid:

1. Interest rate changes will cost you more than you fought over:

For every ½% increase in the interest rate you pay, waiting and fighting over that last $1,000 in price, you COST YOURSELF nearly 50x more than that, PER $100,000 you each borrow!

For each $100,000 you borrow, each ½% interest change will COST YOU $46,021.08!!! Actually, it’s $46,021.085! For a $250,000 home, that ½% interest rate increase just cost you $115,052.71. That’s the INCREMENTAL INTEREST over 30 years. YOU – REPEAT YOU – just cost yourself $115,052.71 fighting over $1,000.

o I will make you a deal. I will pay you the $1,000, you close and give me $50,000. I PROMISE I WILL HAVE A GREAT VACATION AND SEND YOU POST CARDS, PICTURES, YOUTUBE VIDEOS, and post it all to Instagram and Facebook free of charge. I promise…and I will save you $65,052.71. Deal?… Bueller? Bueller? I hear crickets…I better move on…

o I realize that sounds ludicrous…It nearly sounds as ludicrous as saving $1,000 and spending $115,052.71…don’t ya’ agree!?!?

2. Mortgage expense:

First, did you know that the average home mortgage interest rate is close to 5.8%?

Yes, based on a random sample of 10,000 records around the Denver Metro Area: Castle Pines North, Erie, Littleton and Westminster, approximately 15% of the mortgage interest rates were reported. Those averaged 5.8%. Again, this is only of those homes which reported that information, but 5.8%!!!

Let’s assume you have a $250,000 home you are selling…For each month you remain on market costs you minimally $1,500, excluding tax, insurance and HOAs. With those, make it about $1,850 a month.

If mispricing your home costs you three months of being on market: Cost to you: $5,550.

At today’s rates you should be sub 4%, and as low as the high 2% for 15-year loans.

3. Lower Final Price

Even in these inventory constricted times – which is a bit of a falsehood due to shadow inventory, but that’s another subject for another day – homes will sell for about 97% or 98% of the final listing price.

Many people believe that this means any price they pick will obtain an offer 97% of its benchmark. Au contraire!

o This is like assuming you will get 97% of $25,000 for a 1986 Yugo GV if you put it on eBay. Sounds crazy, doesn’t it. Well, Yugos are inventory constricted, too. People that own them love them, too!…just like you love your home…

Forgot what they look like? Here’s one:

Why won’t it sell for $25,000? Because it’s not worth it. In fact, I was in a parts store in Parlin, NJ, back in 1988, when an owner of one asked the counter person, “Where can I get a clutch for a 1986 Yugo GV?” (The car – the WHOLE car – sold for about $3,600 NEW, by the way.)

To which, the response was, laughingly at the point of hysterics, “Why?! Isn’t that car just disposable?” He added in perfect New Jerseyese: “They should call it the Yugo [insert New Jersey physiologically impossible to actually perform verb here] yourself!”

o Well, housing is like Yugos: people will usually only make an offer WHEN it is within 3% of its market price. It is incorrect to think they will make a 97% of list price offer.

Whether it’s an ’86 Yugo or a Denver two-story, people won’t pay what YOU think it’s worth, only what THEY thinks it’s worth – or 97% of that.

So, it’s the correct pricing that drives the offer, not the arbitrary price. You couldn’t leap the Grand Canyon, but you can step over a gap in a subway platform…because, just like in a business deal, the other side is reachable.

Making it worse, studies suggest homes that go stale will sell for about 10%-20% less. Why? Because people (like you and me) ask: What’s wrong with that home? Why isn’t it selling? The home becomes improperly stigmatized.

4. Better Quality Transaction

o How much time have you spent at work dealing with a bad transaction? How much with a good transaction? I bet the bad transaction costs you time off work (and lost pay/vacation/PTO time) when the other party is of lower quality.

Now, lower quality is not quantifiable, but we all know it when we see it. Ask any broker or REALTOR®, the Seller that respects the market price quickly gets the Buyer that respects the market price and the deal’s integrity.

When you become stale or overpriced, the other party is always introducing drama into the transaction. They want this, and THAT is not what they meant. In short, they [rightly or wrongly] sense a shift in the psychological power position shifting to them, and subject to greatly influence through incrementalism. Thus, this leads to higher drama…and more distractions.

All of that costs time…and because business happens in the daylight, costs you and your co-purchaser pay/vacation/PTO…and sanity.

So, now that you see the REAL costs of incorrectly pricing, we’ll take you through how to avoid incorrect pricing in our next installment.