Have you ever lived in a neighborhood where one of the homes for sale seems to sit for an especially long time with fewer and fewer people viewing it?
It’s a nice enough home, right? Lots of curb appeal and you’ve seen the interior and it’s delightful.
So, why isn’t it selling?
In a word?
Even worse, if it was originally overpriced and has experienced a series of price reductions, the home is stigmatized.
What this means is that homebuyers think that there is something wrong with the home and most of them won’t even bother to look at it.
So, if you’re considering selling your home and want to “experiment” with pricing, beware of these 3 common home pricing mistakes.
1. Pricing too high out of the gate
It’s common knowledge in the real estate industry that overpriced homes take longer to sell. Why? Well, think about the last time you bought something. Let’s say, a pair of pants. Did you buy the first pair you came across? Probably not. You probably tried on a few pairs, or, if you were shopping online, you compared prices and reviews at a few different retailers.
Homebuyers do the same thing. They don’t buy their home in a vacuum. They’re out there looking at a variety of homes in a variety of neighborhoods and at a variety of price points. Once you do that for a few weekends in a row, you start to get a good sense of what a home is worth the moment you step inside.
Homebuyers in Oakland and the rest of the San Francisco Bay Area, in particular, are used to the idea of making multiple offers before they finally get a house under contract, so the shopping process can be lengthy.
My point here, is that first impressions matter. They matter a lot. When potential homebuyers walk into your home, they are sizing it up, comparing it to the dozens of other homes in your neighborhood that they’ve already seen.
If they sense that the home is overpriced, they’ll assume that either you won’t want to negotiate with them, or that someone else will come in with an offer higher than theirs, and thus, they are less likely to put in an offer at all.
And if enough homebuyers are in the same boat, your home will sit on the market. And sit and sit and sit. Remember the stigma I mentioned above? It gets stronger with each additional day added to your “days on the market” count.
So the first lesson in pricing real estate is, price it right. The first time. Don’t let your greed get in the way, and don’t play games.
2. Relying on online home price estimates
Admit it, you’ve checked your home’s Zestimate on Zillow, right?
Unfortunately, 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.
Even given two identical homes with the same floor plan, in the same neighborhood, and built in the same year, there can be substantial differences in the condition of the homes that could affect price.
Furthermore, since online price estimate sites don’t have access to all of the MLS listings and, most significantly, the sold listings (which is what market value is based on), their algorithm can be faulty.
Zillow admits that their “median error rate” is about 8 percent, according to Kenneth R. Harney in the L.A. Times.
Harney goes on to remind us that 8 percent is the national error rate and, because all real estate is local, the rate varies by region. In the San Francisco Bay Area, the error rate is about 12%, which, given Oakland’s current median home value, is roughly $90,000.
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. The second best way is to ask a real estate agent to compile a comparative market analysis (CMA).
Since agents use many of the same techniques as appraisers, we typically match or come quite close to the appraised value of a home. If you’re curious, we’d be happy to do a free valuation of your home.
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. Or, in this ultra competitive Oakland market, the home might be purposely underpriced, to attract more attention and competition. I know, it’s a crazy world out there.
The true market value of a home is based on what buyers actually paid for nearby homes, similar to yours.
To that end, I try to dissuade my home-selling clients from basing the price of their home on some pie-in-the-sky figure that may not reflect reality.
Determining the value of a home includes far more than checking sales prices. I am happy to show you – at no obligation — what I do to determine the current value of homes and to provide you, free of charge, an analysis of your home’s value.