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Naturally, all sellers want to get the most money possible for their homes when they sell them. There is one item that, if not perfect, will cause your home to sell for less than it should — that single item is the price.
Pricing your home properly to begin with is without question the single most important factor to selling your home for top dollar. It is a delicate balancing act that, when done properly, positions your home perfectly in the marketplace to sell for the absolute highest possible price. When the home is priced too low, it will sell quickly but for less money than it should. When the home is priced too high, it will sit on the market for a long period of time and ultimately sell for less money than it should.
The biggest mistake I see all the time by owners selling, as well as by real estate agents, is overpricing a home to start with and having to reduce the price multiple times. When a home is listed for sale, it reaches the highest number of potential buyers the first few days it is on the market. If a home is dismissed as being overpriced early on, you will lose potential buyers.
Typically, buyers will flip through listings online; they look at the main home photo first, then they look at the price. If the potential buyer does not like either of those items, they will move on to the next listing. Be honest: How many times have you done that? I do it all the time.
The challenge is pricing the home properly. You can use the Zillow Zestimate; you can see how much a neighbor’s home is listed for and price a home the same, or you can just price the home at the amount of money you “want” to get (or need to get) for it. I’m sorry to tell you that none of those methods work, and they certainly will not help you sell a home for top dollar. Let’s take a quick look at why these methods don’t work.
The Zillow Zestimate is a very popular, well-marketed tool. Zillow is in the business of generating leads for real estate agents, and it is very good at it. The Zillow Zestimate is an interesting tool, but it is not usually accurate. The entire system is computerized and based off of public records that are sometimes incorrect. There have been many occasions when I have come across public records in which the number of bedrooms, bathrooms or the square footage of a home has been incorrect. All of these errors lead to inaccurate Zestimate results.
In my opinion, the biggest issue with the Zestimate is its inability to take into account items such as home features, upgrades and the condition of a property. Those items require an actual human to take an in-depth look at your property and determine how it truly compares to another property. Once that determination is made, proper adjustments to the value are made.
I’m not here to bash the Zestimate. It works OK for general property value estimates, especially when the home is in a subdivision of similar homes. A home is most likely the single largest item you will sell in your lifetime. Do yourself a favor and do not use the Zestimate as a pricing tool for your home — it could end up costing you tens of thousands of dollars.
Looking at how much a neighbor’s home is listed for or seeing how much other properties currently for sale are listed for does not work because we want to know exactly what homes have sold for, not what they are attempting to sell for. The only thing a home still for sale or “active” tells us is that the home is probably overpriced. The most accurate way to predict what a home will sell for is by finding out what similar homes sold for.
Listing your home for how much you want or need to get is wrong. Truthfully, it does not matter what you want or need to get for a home. That is a poor pricing strategy. The fact is, a home is worth exactly what a qualified buyer is willing to pay for it. What you want or need has no bearing on that.
The key to selling a home for top dollar is to strategically price the home. To do that, you need to take a detailed look at similar homes that recently sold in the area. Hire a real estate agent who is an expert in the area where you are selling your home. Know the average current days on market for the homes that sold. Using this data, interview real estate agents and find out how many days on market their homes that are currently for sale and recently sold are averaging. Also find out how many price reductions were needed and how much those price reductions were. An agent who has an average days on market higher than the current sold average or multiple price reductions that total more than 10 percent is either not very good at marketing or is overpricing his listings.
A great real estate agent will know the local market and complete a comparative market analysis (CMA). This will allow the real estate agent to accurately compare a home to recently sold homes on the market. The trick is to price a home so it is considered to be the best value in the price range.
Remember that if a home is overpriced compared to the other homes on the market, all you are doing is helping other people sell other homes by making their homes look like a better value. The guidance of a high-quality real estate agent can help homebuyers land on the most strategic price and get a home sold for top dollar.
Sticker shock stalls downsizing boomers—CNBC, Friday, February 27, 2015, by Diana Olick
Betsy Friedlander, 66, and Mike Klipper, 67, have adored their light-filled, three-story colonial in suburban Bethesda, Maryland, for nearly three decades. They had the more-than-3,000-square-foot home built, and they raised their two sons in it. Now with the boys grown and gone, they are looking for a new home as part of a new lifestyle.
“I think we wanted to have more of an urban life, if we could be downtown and walk to everything, that would be our preference,” said Mike.
But after an exhaustive search of condominiums and townhouses in downtown Washington, D.C., and in downtown Bethesda, they learned a tough lesson about this new lifestyle. It has become incredibly expensive. The prices were so high, and the properties so small, they would be getting very little for their money. One bedroom condos were selling in the $1 million range in some buildings.
“We started looking in D.C., and we were shocked, absolutely shocked, because we thought we would be able to sell our house and put a little money in the bank, and buy something we would enjoy,” said Betsy. “Even if we went up a substantial amount, we didn’t see anything that we could feel comfortable living in.”
Even making a lateral move, buying for the same prices as they could sell their home, they would get half the space and still have to pay large condo fees. They finally decided to give up.
“Here we stay!” proclaimed Betsy, with a tinge of regret.
It’s a problem facing the baby boom generation (born between 1946 and 1965) from coast to coast, and it is also creating a larger problem for the overall housing market. Boomers were expected to downsize out of their large suburban homes, bringing much needed inventory to the market.
Their desire, however, to live in walkable, urban centers, where they can lead an active physical and cultural lifestyle, is just not affordable in today’s tight market. They are therefore staying put longer, and causing a huge shortage of available inventory for the overall housing market. Renting isn’t much an option either with rents nationwide at record highs.
“Fifty percent of boomers feel like they can’t get out of their house, and that’s limiting supply,” said Jane Fairweather, whose Bethesda real estate firm represented Betsy and Mike in their search. “So the houses that we’re waiting to come on the market, for the young families that are trying to move into the good school systems and the good neighborhoods, aren’t coming on.”
There were 9 percent fewer homes for sale in January of this year than there were one year ago, according to Realtor.com.
That, in turn, is pushing prices higher for the homes that are listed, because those homes are now seeing bidding wars. Higher prices are then sidelining first-time and even midlevel buyers, in something of a vicious circle.
“We were a bit shocked at the prices, yes,” said Howard Sokolove, also a resident of Bethesda.
Sokolove, in his early 70s, is retired, but his slightly younger wife, Ruth, is a baby boomer and still works as a nurse in a nearby hospital. They already sold one of their cars, hoping to move to a more urban setting.
“We would have to spend at least twice as much, maybe 2 ½ times as much for a similar-sized space,” said Howard.
The Sokoloves decided to stay put as well, although they worry about aging in a house with stairs and a large yard that needs upkeep.
“I’m learning to love what I’ve got,” he said.
Back at her real estate office, Fairweather explained how she rationalizes these moves to her clients. She asks them to think about what rooms they use the most. The answers are generally the kitchen, family room and bedroom.
“And if you measure that square footage, it’s going to be close to what you’ll end up with in a condo,” said Fairweather, “but it’s a major psychological transition, and oftentimes it takes a lot more time to get people ready.”
The problem is considerably more acute in higher-priced suburbs of major urban markets, but even in smaller cities, the inventory problem persists.
Some builders, like Pulte and Lennar, have put major resources into so-called active-adult communities, where single-level homes are offered at very affordable prices, and they have seen strong demand; these communities, however, are generally not close to urban centers. They tend to be more popular in the South and Midwest and in less urban areas.
“I think that part of the enjoyment that we have is being in a diverse community. That’s really important. And diverse in every way. Mike and I enjoy being with people of different generations,” said Betsy.
She and Mike said they would not consider moving to an active adult community.
Zillow offers estimates of your house’s value. But the error rate can be high.
By Kenneth R. Harney
February 6, 2015
When “CBS This Morning” co-host Norah O’Donnell asked the chief executive of Zillow last week about the accuracy of the automated property value estimates – known as Zestimates – that can be found on his company’s Web site, she touched on one of the most sensitive perception gaps in American real estate.
Zillow is the most popular online real estate information site, with 73 million unique visitors in December. Along with active listings of properties for sale, it also provides information on houses that are not on the market. You can enter an address or a general location into a database of millions of homes and probably pull up key information – square footage, lot size, number of bedrooms and baths, photos, taxes – plus a Zestimate.
Shoppers, sellers and buyers routinely quote Zestimates to realty agents – and to one another – as gauges of market value. If a house for sale has a Zestimate of $350,000, a buyer might challenge the sellers’ list price of $425,000. Or a seller might demand to know from potential listing brokers why they say a property should sell for just $595,000 when Zillow has it at $685,000.
Disparities like these are daily occurrences and, in the words of one realty agent who posted on the industry blog ActiveRain, they are “the bane of my existence.” Consumers often take Zestimates “as gospel,” said Tim Freund, an agent with Dilbeck Real Estate in Westlake Village, Calif. If either the buyer or the seller won’t budge off Zillow’s estimated value, he told me in an interview, “that will kill a deal.”
Back to the question posed by O’Donnell: Are Zestimates accurate? And if they’re off the mark, how far off? Zillow chief executive Spencer Rascoff answered that they’re “a good starting point” but that nationwide Zestimates have a “median error rate” of about 8 percent.
Whoa. That sounds high. On a $500,000 house, that would be a $40,000 disparity – a lot of money on the table – and could create problems. But here’s something Rascoff was not asked about: Localized median error rates on Zestimates sometimes far exceed the national median, which raises the odds that sellers and buyers will have conflicts over pricing. Though it’s not prominently featured on the Web site, at the bottom of Zillow’s home page in small type is the word “Zestimates.” This section provides helpful background information along with valuation error rates by state and county – some of which are stunners.
For example, in Manhattan, the median valuation error rate is 19.9 percent. In Brooklyn, it’s 12.9 percent. In the District, Zillow is unable to compute an error rate. In Somerset County, on Maryland’s Eastern Shore, the rate is an astounding 42 percent. In some rural counties in California, error rates range as high as 26 percent. In San Francisco it’s 11.6 percent. With a median home value of $1,000,800 in San Francisco, according to Zillow estimates as of December, a median error rate at this level translates into a price disparity of $116,093.
Some real estate agents have done their own studies of accuracy levels of Zillow in their local markets.
Last July, Robert Earl, an agent with Choice Homes Team in the Charlottesville, Va., area, examined selling prices and Zestimates of all 21 homes sold that month in the nearby community of Lake Monticello. On 17 sales Zillow overestimated values, including two houses that sold for 61 percent below the Zestimate.
In Carlsbad, Calif., Jeff Dowler, an agent with Solutions Real Estate, did a similar analysis on sales in two Zip codes. He found that Zestimates came in below the selling price 70 percent of the time, with disparities ranging as high as $70,000. In 25 percent of the sales, Zestimates were higher than the contract price. In 95 percent of the cases, he said, “Zestimates were wrong. That does not inspire a lot of confidence, at least not for me.” In a second Zip code, Dowler found that 100 percent of Zestimates were inaccurate and that disparities were as large as $190,000.
So what do you do now that you’ve got the scoop on Zestimate accuracy? Most important, take Rascoff’s advice: Look at them as no more than starting points in pricing discussions with the real authorities on local real estate values – experienced agents and appraisers. Zestimates are hardly gospel – often far from it.
Source: Washington Post
STARTING WITH ZILLOW’S ZESTIMATE MAY NOT GET YOU VERY FAR
By Bob Hunt
A couple of weeks ago real estate columnist Kenneth Harney reignited a heated real estate conversation about the use and value of “Zestimates” — the automated property value estimates that appear alongside otherwise objective property information provided by Zillow, the dominant real estate information site on the Web.
Throughout the real estate community agents complain about these Zestimates, which — despite Zillow’s disclaimers — are often taken as gospel by both buyers and sellers. (Typically, of course, the Zestimate is accorded such status when it happens to support the position of the concerned principal. Buyers quote Zillow when the Zestimate is low, Sellers when it is high.)
Agents around the country have weighed in on comment posts and the blogosphere. Some say Zestimates are consistently too high, some say too low, and some say they are just too often erroneous — giving both low and high valuations.
In my own experience, a decidedly unscientific sampling of recent closed sales showed that the Zestimates had tended to be on the high side, with a median error rate of 10%. But, credit where it’s due, some of the Zillow estimates were, as far as real estate valuations go, right on the money. One Zestimate indicate a $480,439 value for a property that ultimately closed at $484,000. Pretty impressive for a remotely-located automated valuation system.
Zillow — which makes its money on advertising purchased by real estate agents who have supplied it with critical information (listings) in the first place — is sensitive to the problems that Zestimates can cause for agents. (It’s awkward to be an agent who appears to be endorsed by Zillow when your CMA indicates a value $50,000 lower than the Zestimate.) To that end, Zillow recently made available to its agent-customers a document entitled “Talking Points: Scripts for Explaining the Zestimate to Clients”.
Zillow spokespersons are fond of saying that Zestimates are not appraisals; rather, they are “a good starting point” or sometimes “just a starting point.”
But what is that supposed to mean? Any number picked out of the air could be a starting point. Especially if we don’t even know if the Zestimate is liable to be high or to be low, how does it help us to start?
Presumably, the Zestimate is a “starting point” for a conversation that aims to get to a reasonably accurate evaluation. But, as a starting point, the Zestimate provides precious little help in that regard. Sure, if it is incorrect about some of the few public records characteristics (e.g. age, number of bedrooms, square footage) adjustments can be made accordingly. (There is a process for correcting such misinformation on Zillow.) But, outside of that, the Zestimates, allegedly based on “millions of data points”, provide no help as a so-called starting point. That is because Zillow doesn’t say what those data points were or how they were factored into the result.
If you have a disagreement with a CMA, or even a full-blown appraisal, you have something in hand that you can work with. What comparables were used? What might have been overlooked? How much value was attributed to this feature or that? Are features of the comparables (e.g. view, street location) adjusted in an appropriate manner?
A Zestimate doesn’t allow for those questions to be asked. That is because you don’t know what data the Zestimate was based on; nor do you know how adjustments were made. So what help is it as a starting point? You just have a black box with a number on its output screen. Good luck with that conversation.