How to Price a Home
The best way to determine a home’s list price is NOT to rely on Zillow, but to combine known home data points including a seller’s knowledge, past sale data or comparable sale analysis, and some savvy thinking.
What is the Zillow Factor Anyway?
Do not seriously consider Zillow’s Zestimate or any home pricing algorithm as an accurate factor when pricing a home. Zillow’s Estimate is off 5-7% so that is not an indicator of value. Pricing algorithms depend on similarity of homes, but not all homes are similar, so such algorithms leave critical data out of the pricing equation.
Does Zillow’s price estimate influence what buyers think?
Zillow’s Zestimate does not influence buyer’s ultimate decision of whether to buy or not buy a home, but it sure does create a lot of unwanted stress for sellers who erroneously believe buyers rely on Zillow Zestimates . Buyers use their own internal algorithm called a brain to figure out value, not the Zestimate. In other words, Zillow’s valuations provide no real value to either buyers or sellers.
Can I get Zillow to change their Zestimate of my home?
Yes, they have a “challenge” bottom. But why should a seller care if buyers don’t rely on Zillow’s Zestimates in deciding to buy a home?
Use Home Data Points to Determine Listing Price!
A professional real estate pricing expert (a.k.a. Realtor) or savvy seller should begin with the seller’s known data including when the home was purchased, for how much, the time held, and the cost of improvements . This data with the addition of expected appreciation can tell a fast math story of home value.
But, remember, every city has different appreciation rates for example many towns see appreciation somewhere between 2-3% a year while fast growing cities such as greater Denver and St. Pete have seen real estate prices increase as much as 6-10% a year. As a note to sellers, math never lies.
The next data point to calculate is past sales data with comparison to your home . If there are similar properties that have sold within 6 months within a few miles of your home, then take that sale (or sales) and begin the process of adding or subtracting for what your home has or does not have. That process is similar to what a licensed real estate appraiser does to estimate value and is known as matched paired analysis.
Next, interview a few listing agents and see what they have to say about value. Of course the typical listing agent over states value because they want the listing. Avoid using homes currently listed for sale as they are not data points.
A seller’s list price should always evoke a buyer’s hope that they can negotiate a seller down into their happy buy zone. If buyers don’t have that hopeful feeling no offer will be forthcoming. Sellers often over-price homes is because they think if they list a home exactly where they want to sell it, buyers will offer less than the list price and they will never get their happy sell number. This is not true!
Sellers should have but one goal which is to evoke buyer hopefulness. It is that “buyer hopefulness” which results in offers. Once an offer is made, it’s up to the skilled listing agent (negotiator) to get that buyer to pay the list price or possibly work multiple buyers to pay more than the list price.
So remember, the killer of buyer hopefulness is wiggle-room. Wiggle-room deters offers because it adds too much distance between a buyer’s happy buy zone and a seller’s list price.
Order your free comparative pricing analysis from pricing experts at Altru Realty.