How To Lose Money Selling A Home

The amount of profit you enjoy from the sale of your home can be greatly affected by market conditions. However, no matter which environment we’re in when you choose to sell your home, not considering the factors below can lead you to leave good money on the table.

Lack of Clarity on Why You Want to Sell

Just like in business, when you don’t have a clear understanding on why you’re moving in a particular direction it’s easy to waste time, energy and money wandering to an undefined endpoint. You not only have to have a goal, you should also commit to “your why” for having that goal so more effective and efficient actions can be made toward reaching it. For example, during the peak of Austin’s 2021-2022 hot housing market I had clients asking me if they should cash out on their home. They didn’t know where they would go, if they would buy or rent next, or what they would do with the money from the sale of their home. This is a crap reason to sell. It’s motivated by speculation and greed, and it can start a chain of events that may put you in a worse position than if you did nothing or leveraged the low interest rates at that time to level up. Additionally, lack of clarity opens the door to becoming overly emotional about the sale of your home. When people are not excited about where they’re going, they tend to cling to their current situation. Emotional attachment is expensive and can put blinders on your vison when it comes time to make decisions.

Making unnecessary repairs and upgrades

Speaking of emotional sellers, in my experience these sellers tend to make the mistake of fixating on the things they didn’t like about their home and trying to “fix” those things before listing. While some features of your home might make sense to address, others may not… it depends on 1) who the most probable buyer is for your home, 2) the quality and condition of your home as it compares to other homes available in your neighborhood, and 3) the local market environment. Additionally, over-improving a home in relation to other comparable homes in the neighborhood could potentially put you at a disadvantage… or maybe not. It truly depends on the market. That is why it’s so important to connect with a local real estate professional that is seeing market trends in real time. They—meaning I—can provide guidance on which improvements to make in order to get top dollar for your home and which ones may not deliver the impact you’re hoping to realize. In most cases it’s more effective to:

• Focus on curb appeal and cosmetic improvements
• Stay away from making cosmetic changes based on your personal preferences and taste
• Get an opinion from a professional home stager and a REALTOR before making edits to your home
• Get a pre-inspection to assess the condition of non-cosmetic repairs which might be needed, and strategize with your REALTOR on how to address those items

Lack of strategic staging

It goes without saying that at the very least home sellers should declutter and deep clean. But is that enough? Thanks to social media, buyers’ expectations have expanded to include all of the senses. Millennial buyers are looking for a vibe; a promise of a lifestyle they are aspiring to achieve. Beyond just looking sufficient, the presentation of a home needs to create an e-x-p-e-r-i-e-n-c-e. The best compliment I received on one of my listings was that “it transported me to an ultra-chic place with the perfect music playing in the background… and what was that scent?! Not overpowering and so very pleasant!” Prior to listing the home, the homeowner was contemplating a major bathroom remodel, landscaping and sprinkler repair, replacing all the windows, and a few more substantial edits that would have cost a decent amount of money and time. Rather, I brought in a professional stager to supplement the existing furniture and I made a few recommendations for improvements that could be knocked out in a weekend. That, along with a specific streaming music station and complementary air freshener, helped set the tone. I was able to list the home for a price 15% higher than comparable homes and help the seller successfully close with an offer that was 25% higher than the list price. So, in the end the seller didn’t have to spend $30k+ to make ready the home; the seller was able to put all of that—and much more—back in their pocket. NOTE: In the event your home does need improvements and upgrades in order to fetch the best price, you can leverage a program like Compass Concierge to get fronted for the cost of those home edits. Learn more about this program here.

Sh*ty photography

Beautiful photography is one of the most powerful tools for selling your home. If you don’t use best-in-class photographers to show your home in its best light, make a positive first impression and attract more buyers, then you’ll definitely be leaving some money on the table. Studies on the quality of photography in real estate showed that:

• Homes with professional photography get 61% more views than those without them
• Homes showcased with professional photography sell 32% faster
• Listings with pro-quality listing images close between $934 and $116,076 higher than comparable listings with low-quality photography

Pricing too high or low

Determining the optimal list price for a home is part science and part art. To understand the science, you need to be aware of what’s happening in your neighborhood and market. The market dictates the most likely price range in which your home will sell. However, as a seller you want to get the most you possibly can out the transaction. This is where the knowledge and skill of the real estate professional you’re working with will become critical. While the market will dictate the probable price range for your home, where within that price range is very much influenced by the pricing, presentation, and marketing strategy for your home. If your initial list price is on the higher end of the probable range, there needs to be clear and justifiable reasons why your home should sell for more than others that are being offered. If not, then it can potentially sit on the market for a while. Accumulating days on market (DOM) is almost never a good sign in real estate. Even if it’s not the case, excessive DOM suggests to buyers that the home is not a desirable home, that it has something wrong with it, or that the sellers would be uncooperative during a transaction. As time ticks by, sellers are usually more willing to progressively reduce the price; but, this type of move often results in a home actually selling for less than it could if it were initially priced correctly. Additionally, think of how the listing price of your home will include or exclude groups of buyers based on their search parameters. For example, if you want to list your home for $565k it may not show up in the search results for a buyer that set their max budget to $550k (and I can tell you from my experience that a “max budget” used for searching is often not the actual maximum that a buyer can comfortably fork over for the right house. On the other hand, if a home is priced too low in comparison with other similar homes in the same neighborhood, buyers may assume that something is wrong with the home. Plus, this puts sellers in a weak negotiating position (‘cause rarely can one negotiate up; it’s always down from the starting point).

Not Keeping Receipts of Significant Improvements

Have you been living in your home for at least two years? Did you accumulate a large amount of equity on your home over time? Well, if you sell it, you can potentially exclude up to $500k of the profit from taxable income (and up to $250k if you are not married). Understanding rules related to capital gains can help keep a ton of money in your pocket rather than paying the IRS. To figure out how much capital you have gained on the sale of your home, you simply subtract your original purchase price from the selling price of your home. If that amount exceeds the capital gains exemption limits for a primary residence, then you’ll want to reach for your receipts! The closing costs and settlement fees for both transactions related to your home, and the cost of significant capital improvements that you made over time (like major renovations, additions, landscaping, roofing, and so on) can help reduce your potential tax burden. You can only deduct home improvement costs that you can prove; this is where record keeping becomes critical. However, if you can’t find receipts, you can potentially use photos, statements from contractors, and affidavits from neighbors to convince the IRS to factor in some of those costs when calculating the tax amount owed. — If you’re considering selling your home and would like strategic advice on how to maximize your investment, contact me.