Sell Your House Fast Charleston SC: Pricing Mistakes Sellers Make
This is a continuation of the the post I started last week “Sell Your House Fast Charleston SC: Seller Mistakes To Avoid (Pt 1)”.
Today I am looking deeper into why home owners fail to price their home correctly when they do not rely on the information of real estate agents.
It basically boils down to available information and resources to determine value. For instance, many home sellers will look to online sites such as Zillow for their home value.
However, as I have said before, Zillow is not a reliable source to determine home’s value.
It can be a great tool to see a ballpark idea of what your home is worth, but should not be an end-all-be-all number to base a listing off of.
As a matter of fact, Zillow even tells you on the site just how much their “Zestimate” is off.
(For Charleston County, the Zillow Zestimate is off more than 5% for 69.3% of the houses listed.
For Berkeley County it is off more than 5% on 60.3% of the houses, and for Dorchester County it is off on 64% of the houses).
Bill Gassett, a Massachusetts Realtor, explains this in greater detail on his Maximum Exposure Real Estate Blog (emphasis mine):
“Zillow is one heck of a useful tool for most things in real estate but not for giving an accurate value of a home! Real Estate agents are questioned every week with inquiries like is a Zestimate accurate?
A “Zestimate” as Zillow likes to call them is an online valuation tool for valuing property. Zillow has a huge database on the selling price of homes in different areas, and it does a pretty amazing job of compiling that information and extracting estimates.
However, those estimates are rarely accurate.
They work for ballpark ideas, not for exact figures. Zillow uses the public records of all of the homes sold in your area.
This is great when you want a general idea of what homes are worth in your geographical turf. You can search for homes of similar size, with similar features.
But those records do not tell the whole story. They cannot account for improvements recently made, or problems that go unreported.
The algorithms used by Zillow cannot possibly account for the new bathroom you just put in, the glamorous kitchen remodel or on the downside, the broken sprinkler system in your backyard.
A well-connected Realtor, though, is likely to have the inside scoop on many of these homes. He or she can use this information to set an accurate price, far more so than Zillow can.
It is easy to make a big pricing mistake when you are going on “ballparks”.
Keep in mind I have seen the value presented on Zillow off by over $150,000 from the actual value of the home.
Not small peanuts when it comes to pricing a home. This is probably the #1 way sellers get their price wrong.”
Realtors have a leg up because they can access the latest information from the MLS. This allows them to see all of the most recent sales in a neighborhood, and find the best comparables to determine the fair market value.
They can also see what the trends are in a neighborhood as far as prices are concerned going back weeks, months and even the last year. The average Realtor will have a better grasp on the local market than any national site.
However, another mistake made by sellers is not listening to an agent. On the flip side, listening to an agent is also the biggest mistake some sellers make. Wait, what?
When You Should Listen To An Agent
When it comes to overpricing a home, often the seller is to blame. Despite the advice of a Realtor (or, sometimes the opinion of a few different agents), some home sellers will not heed the advice and still want to list for a price that is higher than it should be.
Jaymi Naciri of RealtyTimes.com explains this in her post “Your House Usually Isn’t Worth As Much As You Think”:
“You probably already have a good idea of the price you want for your house. But is it based on reality or is it simply a number that sounds good?
Perhaps it’s what you need to comfortably get out of your house and into something bigger. But that doesn’t mean you’ll get it.
“Here’s a real estate fact that every home seller should know: Buyers determine the right price for a property, not sellers,” said the Washington Post.
“The market price for a home is determined by what an able and willing buyer ultimately pays for it.
There are certainly things that homeowners can do to influence buyers’ perceptions of their home’s value and hence increase the price buyers are willing to pay for it. But, ultimately, the buyers will set the price.”
It is important that home owners keep in mind that at the end of the day, the market determines the price of your home.
The housing market acts like the stock market—constantly in flux. On the stock market, you can sell or buy stock whenever you want. However, at that moment the market will dictate what that stock is worth.
Just because you purchased Coke stock for $50 2 years ago, does not mean that you will sell it for $100 tomorrow. If that stock is only worth $15 tomorrow, then you will have to accept $15 or you won’t sell it.
That is a very simplified version, but don’t miss the bigger point—the market dictates the price, not you.
Real Estate Agents are in tune with the real estate market numbers and can share this data with you.
Make sure your agent performs a CMA (a Comparative Market Analysis) which will show comps and help validate their opinion on what price you should list at.
If you don’t like what your agent is telling you about price (they recommend a price lower than you thought your home was worth), but the data supports their opinion, then you should listen to what the market is trying to tell you.
However, sellers do not always listen to the best professional advice. Sometimes they simply think they can be the exception.
Or as Blanche Evans at RealtyTimes.com put it in her post “Why Sellers Overprice Their Homes”:
“There’s one piece of advice that every real estate agent on earth will tell you – “If you overprice your home, it will take longer to sell and sell for less money.”
Yet, sellers ignore them, and overprice their homes anyway, hoping their home will be the one to defy market physics.”
When You Shouldn’t Listen To An Agent
On the flip side, not all agents give the proper advice. If you ask 3 Realtors for an opinion on the right list price, chances are you will get three different numbers.
Even looking at the same data, it is possible to have different price opinions. However, the opinions shouldn’t be too far off from each other.
If you have an agent that recommends a substantially higher listing price, or, if other agents do not agree with your suggested list price and one agent does, then that should be a red flag.
There is a tactic known as “buying listings”. It is technically unethical for an agent to do so, yet it is not uncommon to see.
As Bill Gassett explains:
“Everyday there are thousands of homes that have price reductions across the country. In some cases it is an overzealous seller.
In just as many cases there are agents who are setting unrealistic asking prices. Real Estate agents who mislead sellers on market value is not all that uncommon.
The agents strategy is to get you to sign a contract beating out the other agents you are speaking to and then bang you over the head for price reductions in the coming months.
Some agents don’t even care if they sell your home as they are using it to generate buyer calls for homes they can sell elsewhere!
Choose a Realtor that has a record of recently sold homes, homes that were bought for near the price they were first set at.
Having an overpriced home with a lousy Realtor is a kiss of death!”
There is an old saying in real estate that “Your best price should be your first price”. Sellers sometimes mistakenly think that they can always reduce their price later if they start off too high.
However, at that point you will be chasing the market. And history has shown that sellers that chase the market end up selling for much less than they would have if they had priced right from the start.
Bee sure to visit my Pam Marshall Realtor website.
Stay tuned for part 3 of “Sell Your House Fast Charleston SC”.