How listings agents figure the price of a home
One of the most difficult things for a listing broker to do is to figure out the value of a listing. There are problems if you price the home too high and obvious problems if you price the home too low. If you price the home too high the seller won’t have anyone coming through at all. Then the listing broker has to have that uncomfortable talk with the sellers about a price reduction. At that point you might need to lower the price more than the point you could have had the original list price. In other words if you were going to list for $1,500,000 and your listing broker suggested $1,400,000, you might now need to surpass the original suggested price and lower it to $1,350,000 just to get traffic in your home. When your home first comes on the market is the “hottest” time for the home. Not to mention if you need to continually chase the market by lowering your list price you are essentially negotiating against yourself. You are lowering your price for the world to see without any outside forces making you do so. This weakens your negotiating position considerably. I have seen listings have their prices reduced 6 times and then when an offer finally comes in it’s 10% of the current list price and the sellers are insulted. What I tell my sellers is “well you lowered it 6 times so the buyers assumed you would continue to do so.” It is very important you listen to your listing agent (broker) since it is their job to know what your home is worth.
On the flip side if a seller lists their home for under value then you are just leaving money on the table. It’s OK to go a little under list if you want to sell your home fast or if you have enough equity in your home to stand a bit of a hit and sell it fast and easy. It is best to listen to your listing agent and let them give you a range of what they feel your home is worth. A good Realtor would give you a range, most Realtors would never say “list your home for $X,XXX,XXX.” Most listing brokers will say your home is worth “$X to $Y if you want to sell your home fast let’s list it closer to X and if you have time to sell it list closer to Y.” or “If you do this minor fix you can sell your home closer to Y but as is with these outdated fixtures and broken down Chevy in the front yard it is closer to X.”
My Zestimate says my home is worth more than you
For starters sellers should never, ever use a Zestimate for actually pricing. The only thing a Zestimate is good for (and sometimes not even for this) is to determine trends in the market. It is good to show sellers and buyers if a specific market is going up or down. If a Zestimate is a good tool to use then why don’t the banks just go on Zillow instead of sending out an appraiser? Because Zestimates suck. Zillow is truly the worst thing that happened to real estate in our generation. Sellers need to stop using Zillow. Zillow keeps homes on their site long after they have sold. Local Realtor sites in the Denver Foothills (by MLS rules) need to update their sites on a daily bases and change the status of any property immediately. Zillow does not need to folloe these rules like us Realtors do.
My listing broker says I can get 25% more than the other Realtors that I talked said I could get
If you talk to 3 Realtors about your selling your home and two of them are pretty close in price and one is way higher, then that agent that is way higher is just trying to “buy” your listing. No they don’t want to buy your home just your listing. It is a term in the real estate world that means that broker is telling you what you want to hear so they can get in the door. They either want to use your yard as free advertising and what we call a sign listing. If you are in an area with high traffic they just want their sign there while a ton of people drive by. It’s a form of advertising for them. There is also the fact they want to start at a high price then they approach you a month into the contract and say “well it appears we might be over priced let’s drop your price to the amount the other brokers suggested.” This is very unethical but it is done everyday in the real estate world.
Just listen to your listing broker
The best practice for a seller is to just listen to your listing broker. They know what they are doing. Don’t set your expectations too high. If someone tells you that you can get 25% more for your home than other Realtors they are probably wrong. You can have the best listing broker in Evergreen and they will not be able to convince buyers to buy your home. The market sets the price for your home not listing broker, not the buyer broker, not the seller, it’s the market as a whole. Don’t forget at the end of the day your home still needs to appraise.
How is the value determined?
It is a rather long process that your listing broker goes through. It is more than just looking at a Zestimate. Your Realtor should come out to your home and spend some time there. Looking at your upgrades and your home in great detail. Finding what separates your home from others on the market. That is the challenge in the mountains as opposed to Denver or any other city with lot and block and similar homes. Every single mountain property is different. This is especially difficult for luxury listing agents in Evergreen and the Denver Foothills. Every luxury home has its own little charm and different unique qualities. It is the job of your listing broker to see these and give them value. Then after an hour or so of a tour of your home the agent should go and find comparables of recently sold in your area. The most accurate comps will be found closest to the subject property and sold most recently. With our low inventory in the Denver Foothills brokers sometimes need to travel a bit further from the subject property and go back further in time. Then the broker must make adjustments to the comparables. By that they will compare many different features of your home and the comps. This is something a Zestimate algorithm is unable to do and why it is dangerous to use a Zestimate for determining your home value.