Pricing Your Home
It is amazing how many home owners do not take pricing their home as important as they should. They look at their listing and think completely counter intuitive of the best process and what will benefit them the most. They will do things like look at their Zillow Zestimate. We will not go into much detail about Zestimates. We have have done that in countless posts. Let’s just say don not use a Zestimate to price your home and leave it there. The other thing they do that is listen to a neighbor or friend on what they think the home is worth. Bad idea. Everyone has an opinion usually it isn’t right. Setting a list price based strictly on what the neighbor has their home priced at is also a bad idea. For one if the neighbor’s home is in different condition it is not a good comp. Also what the neighbor’s home is listed for is not showing value it is showing competition. That is a huge difference. Sellers need to be priced below the competition. When the home sells and the price of the sale is made public now it is a comparable.
Pricing Strategy for Selling Your Home
When selling a home, your pricing strategy can make or break your chances for a quick sale. It can also hurt you in the long run. You may actually need to chase the market down in pricing. Meaning you will need to reduce your price more if it is overpriced than if it is priced right. The most traffic of a listing is the new listings. Most homes need to sell in 30 days or less or you begin to chase the market down. Listing at the right price can almost guarantee that a buyer will swiftly snatch up your property, while listing at the wrong price can cause your home to sit on the market for months with not so much as a showing. Then the seller starts to drop the price, 5K, 10K, 20k? When the home would have sold for only 5K less because at the time of the listing that was the “hot price” where things start to happen. When the seller starts to see action on the property.
How to Price Your Home
Unfortunately, pricing is not a simple process, and sellers are prone to make mistakes that waste both time and money. The short answer is you need a real estate agent to price your home. Zillow and those other national sites are an OK indicator of overall market direction. They should not be used to price a home or to be used in determining your offer as a buyer. An algorithm can not tell you the value of a home. They do not consider condition or upgrades and about 1000 other factors used to determine value of a home. Only a real estate agent or an appraiser can give you the true value of a home. Don’t let this happen to you; instead, try to avoid any of the issues that may arise like:
Make Sure Your Real Estate Agent Does Their Research
Without investigating past sales in the local market, sellers tend to base their prices on hearsay or on the listing price of the house down the street, says Leslie Sellers, president elect of the Appraisal Institute. Knowing the prices of your competition is important, but in many markets, listing prices are not a good indicator of what your home will actually sell for.
“Currently in Knoxville, Tenn., you’ll find that homes typically sell for 7 to 9 percent less than they’re listed for,” Sellers says. “So sellers who list their homes based on other listing prices are already almost 10 percent too high about what they expect to get out of their house.”
What to do? Price your home based on a comparative market analysis, a report prepared by a real estate professional that looks at recent sales of homes in your area that are similar to yours. This is really your best bet on figuring the value of your home.
Hiring the Real Estate Agent Who Offers the Highest List Price for Listing Your Home
Let’s get one thing straight, a real estate does not set the value of your home, the market does. If you ask 3 agents and 2 say your value is X then one says it is X+25% you may want to check on that last agent. No agent can sell an over priced home. For one you may make it to the appraisal then they appraiser will burst your bubble real fast. If you ask several listing agents how much they think they can get for your house, and one gives you a significantly higher bid than the others, be cautious: the agent may be trying to “buy” your listing by suggesting an unrealistically high asking price. This practice is unethical and costs you time and money, as you’ll most likely have to slash the price after your home sits on the market unnoticed for many months. This is a common thing that happens. Sellers think their an agent that give the proper value of a home they aren’t motivated because they don’t want to try to sell the home for more than it’s worth. People don’t understand that isn’t how it works. People will not even consider your home if they perceive it being priced too high. These days people know it is a seller market and they won’t bother “low balling”. They just pass by your home and do not consider it at all.
What to do? Listen to your agent. It is their job to price your home. They do it all day every day.
Don’t Get Emotionally Involved
Huge mistake and one of the biggest made in real estate transactions. I am sorry to inform all the sellers out there, selling your home (at least in the eyes of the buyer) is strictly a business transaction. The fact you raised your children in that home does not add any value to it. The fact you spent weekends on DIY projects instead of hiring a contractor actually might lower your value since you are not a carpenter. You’ve likely spent a lot of time, money and energy transforming your house into your home, so it’s natural to be emotionally invested in its sale. Unfortunately, buyers won’t have the same sentimental feelings for your home as you do, so what you think your home is worth shouldn’t be a factor in determining your listing price. Again it needs to be said, the real estate market does not care how much you think your home is worth, how much you “need” to get for your home or how much your cousin says your home is worth. The market decides your home’s value. No one else and the market can be cruel at times.
“As soon as you put your home on the MLS it became a business transaction” Danny Skelly Orson Hill Realty
What to do? Remember that people are not being offensive or saying your home is not amazing when they make an offer or don’t make an offer. Stay objective during the pricing process by focusing on statistics generated by the CMA. Don’t be personally offended by lowball offers. Instead, think of them as the starting point of a negotiation that could result in a sale.
Do Not Price Your Home to High Out of The Gate
“The first 10-20 days on the market are the hot ones…..That is the most important time of your listing…”
Danny Skelly Owner/Broker Orson Hill Realty
If your home enters the market overpriced, many buyers will overlook it from the get-go because it will be out of their range. By the time you reduce the price to fair market value, many potential buyers will have already found something else. Other buyers may initially be interested in your new low price, but they’ll also see that your home has been sitting on the market for some time, which could lead them to believe there is something wrong with the home.
What to do? Price your home correctly the first time to gain the attention of serious buyers and sell faster.
“Let’s Start High and See What Happens…We Have Time…”
Testing the market is something that sellers love to do in a seller’s market. Sellers who aren’t in a hurry often decide to test the market by listing their homes at a high price and waiting to see where the market goes. But in most markets where home prices are dropping, waiting it out may actually cause you to lose money. The greed from this decision almost always bites them. They end up chasing the market down. They miss a ton of opportunities and end up selling for less than they would have if they just listened to their real estate agent.
“Listen to your real estate agent.. They really do know more about selling your home than you do….”
Danny Skelly Owner/ Broker Orson Hill Realty
What to do? Sell your home faster and possibly for more money by pricing your home based on current home values.
Chasing the Market
As mentions in this article and about 5 others in the last few years, chasing the market costs you more than it would have cost you by pricing your home correctly in the beginning. If you list your home too high to begin with, you may find yourself making incremental price drops but never quite catching up with the market.
For instance, Thompson has had a listing in Phoenix for a year that the sellers insisted on putting on the market for $250,000, despite the fact that comparable homes in the neighborhood were selling for around $225,000. Four months and no showings later, the sellers finally decided to drop the price to $225,000. However, home values had declined significantly in those months, so the reduced price was still four months behind the market. Since then, the sellers have been reducing the price on the home about every three months, but never catching up with their competition.
“It is the same as the term ‘catching a falling knife’ used in the stock market. That is a position you never want to be in”
Danny Skelly Orson Hill Realty
What to do? You most likely won’t “trick” or “fool” someone into paying more for your home than it is worth. These folks aren’t buying a small item this is their major investment of the year. Then it also has to appraise. Not to mention you might get a high offer then take your home off the market, then bam! Buyer remorse. They use a silly excuse like inspection termination. So list your home competitively to begin with. If you don’t get any bites, don’t hesitate to lower your price. Work with your agent to reevaluate market conditions and determine the fair market value of your home.