Guide to Selling 2016
The hardest part about selling a home is when the sellers over prices their property. There are many reasons why this does not benefit the sellers. About 90% of the sales on our market happens because the property is priced correctly. It has very little to do with marketing. Real Estate agent will list the property on the MLS (database of houses for buyer agents to send to their buyers). If the property is priced properly, buyers would want to view it and thus increasing the chance of finding a buyer. Here are 3 Common Pricing Mistakes made by sellers in 2016.
1. You can’t pass on your bad deals in upgrades
Just because you spent $20,000 on tiles that normally cost $10,000 does not mean you have an additional $20,000 worth in upgrades. The buyer and appraiser will value your upgrades, but not at the same cost that you put in. It’s going to be market value for the upgrades. If you hired a contractor and they charged you more to install upgrades, it does not mean you can pass that on to the next seller.
Story Time: I had a potential listing client that I had to be educated in this subject. She bought a condo for $60,000 and decided to “upgrade” the property. She spent a total of $40,000 somehow in upgrades. She wanted to list the property for $105,000 to recover the amount spent. The upgrades included normal granite, normal wood flooring and she re-arrange the layout of the condo. The market value of the home is at most $70,000 being generous with the upgrades. Till today, the condo still has not been sold, because no reasonable buyer that will want to pay for her mistake in contracting and designing.
2. Listing high so you can “negotiate”
Sellers will want to list higher than market value in anticipation for the buyers low balling. Depending on the market, why would you want to force a negotiation if there didn’t need to be one? If it is a seller’s market, sellers might be able to get away with listing high because buyers are heavily competing over good properties. If it is a buyers market, this will only cause your property to not be viewed, thus selling slower. But in many cases, this just causes the property to sit longer on the market and creates questions in the eyes of the buyers. The main goal is to attract as many eyes and interest to a house so that you can have a better chance of selling it at a higher value to someone that really wants the house. If you price the property higher in anticipation for a low ball offer, you are only hurting yourself because not as many buyers will be interested in the property.
3. Trusting computers over humans
One of the most difficult tasks in educating sellers about the market value of their home is Zillow or AVM sites. Automated valuation model is a program that values properties based off of an equation using public record and other information from their database. Now how accurate is this information is the problem. Even on Zillow’s website they claim this following information
WITHIN 5% OF SALE PRICE:
This is the percentage of transactions in a location for which the Zestimate was within 5% of the transaction price. Nationwide, Zestimates are currently within 5% of the final sale price 47.3% of the time.
WITHIN 20% OF SALE PRICE:
This is the percentage of transactions in a location for which the Zestimate was within 20% of the transaction price. Nationally, Zestimates are currently within 20% of the final sale price 86.4% of the time.
That means that 47 house out of 100 houses is within 5% of the final sales price. Here an example, the houses appraised market value is $250,000. So they are 47% sure that your house should sell between $237,500 and $262,500
Now within 20% is even scarier. So they estimate properly 86% of the time with 20% margin. So if the house is $250,000. Picture if I went into a listing appointment and basically said, “Mr. Seller, I am 86% sure your house should list between $200,000 and $300,000” You would question me.
It is very important that a seller talks with a real estate consultant because we can use our judgement to accurately price your property based off information that a computer can’t do.