Overpricing your listing can cause your property to sit on the market for months. How can you tell what the correct listing price is for your property?
Last week’s column looked at four of the most common mistakes that can cause sellers to overprice their property. Today’s column provides a case study that illustrates the steps you and/or your listing agent must take to properly set the correct price for your property.
If you’re like most sellers, you want to obtain the highest possible amount from your real estate sale. With the creation of online automated pricing tools such as those provided by HomeGain.com and Zillow.com (there are several others but we’ll use these as examples), many sellers have turned to these tools as a way to establish what their property is worth.
These tools can be a good place to start, but they can also be wildly inaccurate. For example, my current property valuation on Zillow is about 28 percent higher than what the property would sell for in this market. On a $400,000 sale, that would mean that my list price would be $112,000 too high.
To understand how to be more accurate about pricing your property, examine the following case study based on a 1,250-square-foot house situated on a 6,000-square-foot lot in California.
What do the online evaluation tools say the property is worth?
HomeGain’s value estimate ranges between $428,000 and $502,000, while Zillow estimates the value at $373,000. As a seller, I would love to get the $502,000. As a buyer, I would want to pay $373,000. Which number is correct?
For the property in this example, Zillow had 86 comparable sales that have closed in the last six months. The HomeGain site included 10, some of them dating back to 2007. Clearly, closed sales prices (also known as "comparable sales" or "comps") from 2007 are going to be substantially higher than sales from 2009.
The challenge is determining which set of numbers is the most accurate for this particular property. The first step is to make sure you have selected the most appropriate comparable sales. Is each of the comparable sales in the right area?
The property in this example has more value if it is south and west of the two major boulevards that divide the city. In this case, the closer the property is to the beach, the higher its value. …CONTINUED