I’m sure you can share in this experience with me. We all have seen it. Have you ever lived in a neighborhood where one of the homes for sale seems to have sat for an especially long period of time? You’ll notice too that on these homes too that over time they experience fewer and fewer people viewing them.
It’s a nice enough home, right? I mean I’ve seen 1-2 year old homes up for resale that still showed like a new home that sat for 6 months. I saw one recently that had lots of curb appeal and the interior has all kinds of delightful upgrades.
So, why isn’t it selling? In a word it may be overpriced. Sure, there could be other factors as well like competing new construction in the neighborhood, small backyard, or other. Yet I’ve seen over the years no matter what the lot looks like, no matter what you’re competing against, if the house is priced right at some point the buyers in a free market will jump in and make offers.
What makes the situation even worse is if the listing was originally overpriced and has experienced a series of price reductions, the home is stigmatized. People stare at the listing online and wonder, “what’s wrong with it.”
What this means is that homebuyers either won’t even bother to look at it or will go into with a skeptical eye looking for problems.
If you’re considering selling your home and want to “experiment” with pricing, beware of these 3 common home pricing miscues.
Initial list price is too high
It’s common knowledge that overpriced homes take longer to sell. Plan on making 5% less than your listing price if the home languishes on the market for a minimum of two months with no offers.
At today’s national average home price, 5% represents more than $14,000. Unless you overpriced the house by that much, that’s a loss that has to hurt.
According to a March 2012 study by MIT’s Center for eBusiness, nationally homes that remain on the market substantially longer than average saw a $32,000 average reduction in the eventual sales price.
Relying on online home pricing models
Okay we can all admit it, on occasion we’ve checked out our home’s Zestimate at Zillow.com, right?
Unfortunately, it’s so easy and convenient, that many homeowners do just that and don’t understand that there is simply no way anyone can make an accurate estimate of market value without having seen the home. They also focus on the main number at the top of the page without looking deeper. Zillow shows a range of value.
Most AVM’s or automated value models do. This gives more of an idea from low to high what your home might sell for or be worth to buyers in today’s market. Depending on the condition of the home, it may fall on the low end of that Zestimate range. If it’s like remodeled or updated like new, it might go much higher.
Furthermore, the basis for Zillow is tax records and a previous sale date might skew that number low as compared to your renovations or improvements on a quick resale. If the basement was not finished when you bought it for example, and you (or your contractor) didn’t pull a permit with the county you live in to show additional finished heated and cooled square footage, then you’re not getting the benefit of that added value on your Zestimate. Basically, if square footage on the tax commissioner’s website is wrong, then any online valuation models are going to be wrong too.
Zillow admits that their “median error rate” is about 5%, which is the “national” error rate, and because all real estate is local, the rate varies by region. If you dig deeper, the margin of error for the Zestimate in Georgia is 5.4%. You might enjoy looking county to county in Georgia at how your county’s Zestimate’s margin of error stacks up agains the national averages. Several Georgia counties of interest to me with their corresponding Zestimate margin of error;
- Athens-Clarke County 6.1%
- Oconee County 7%
- Gwinnett County 3.3%
- Forsyth County 3.6%
- Jackson County 5.4%
- Hall County 5.9%
Lesson learned; Never rely on a website’s estimate of your home’s value
The only way to truly know how much your home is worth is to have it professionally appraised. Be prepared though as appraisers don’t always tell you what you want to hear. The second best way is to ask a real estate agent to compile a comparative market analysis (CMA). Agents do this quite often!
Since agents use many of the same techniques as appraisers, they typically match or come quite close to an appraised value. Keep in mind though, you could get 3 different appraisers to come out and give you three different appraisals of value on your home. With that said, get 3 different agent’s to give you an opinion of value. Don’t take the high quote either! They’re trying to “buy” your listing. A good rule of thumb is that if two agents who walk your house, take notes, and do a CMA come back within 3-5% of each other, then that’s probably a reliable range of fair market value. The closer they are the better too.
3. Basing your price on your neighbor’s asking price
When you consider putting your house on the market, it’s only natural to want to know what your neighbors are asking for their homes.
Keep in mind, however, that this figure represents what your neighbor hopes to get for his or her home, not its actual market value.
The true market value of a home is based on what buyers actually paid for nearby homes, similar to yours.
“Pie in the Sky” vs the reality of the sales price
To this end, I try to discourage my home-selling clients from basing the price of their home on a ‘pie-in-the-sky’ figure that may not reflect reality.
Please remember though, determining the value of a home includes far more than checking sales prices. In Georgia, I am happy to show you – at no obligation — what I do to determine the current value and a best list price of homes and to provide you, free of charge, an analysis of your home’s value. Call me any time.