Selling a Home? Avoid Overpricing it.
At BlueMatch, we list and sell hundreds of millions of dollars worth of homes all over the country. In doing so, we aggregate and analyze a ton of data. More often than not, when someone fails to sell a home, it is usually one of two things. Price or buyer commission. Offering a buyer commission is an easy fix. Pricing is a little more complex. At BlueMatch, our clients have the autonomy and freedom to list how they want. BlueMatch is here to provide you with the tools and data to make an informed decision. Whether or not you decide to take that advice or use our data is up to you.
Over time, we have gotten really good at being able to predict what the potential outcome will be when someone lists a home with us. If you find yourself struggling to get showings or generate offers, you may want to fix these issues before it is too late.
If Your Home is Overpriced, It’s Okay.
As you may recall from one of our previous blog post Selling a Home is a Logical Transaction, not an Emotional One, the number one reason people fail to sell their home successfully on BlueMatch is they overprice their home. More often than not we hear statements like “my home isn’t like the others in my area because of X” or “my home is worth more than my neighbors because of Y”.
Coming out of the shoots with your home overpriced is not the worst thing in the world. Most people overprice their home by a percent or two. As long as your listing price is within a reasonable range, you can make appropriate corrections. If you decide to overprice it by an unreasonable amount, you may have more issues down the road. remember, the MLS archives and displays your price drops. Going from $359,000 to $355,000 doesn’t look as drastic as $359,000 to $300,000. The latter may raise some red flags.
The truth of the matter is that most people have some level of emotional attachment to their home. The more emotionally attached you are, the less likely you are to make a logical decision. If you make the decision to price your home against the advice of a professional, that’s okay. But you should have a game plan in place for when the data tells you that you are highly unlikely to sell if you decide to overprice.
Have a Plan if You Decide to Overprice Your Home
Before your listing goes live, have your agent gather data on homes in your specific area. Getting a proper peer analysis will create a good baseline or starting point for you. Next, get the average days on market as well as all the price drops that have taken place in your area within the last 90 days. Remember, there is a direct correlation between price drops and how long a home sits on the market. Time is not your friend.
Once your listing goes live, use this data to know where you are at during the entire process and have a game plan. Example below:
- Homes that sit 50% over DOM sell for 1.5% less than the average or roughly $7,500 less.
- Homes that sit 85% over DOM sell for 2% less than the average or roughly $10,000 less.
- The average DOM for my area is 20 days
- I am pricing my home $10,000 over recommended list price
- The average showing requests in my area are 8 per week
If I approach X percent of the average DOM without X amount of showings or any offers then I will reduce my price by X percent. If I approach 80% of my average DOM without any offers, I will reduce to recommended list price.
One of the worst mistakes you can make is ignoring the data and start tallying up days on market. More often than not, we see people rack up DOM only to get frustrated and cancel their listing. After canceling, they list with a full service agent for 3% and end up selling well below what we had originally suggested on top of paying a hefty commission.
Below are three examples of homes in the Denver area that were overpriced and did not make adjustments until well past their average days on market. As you can see, the price drops are significant. I am also willing to bet that they will continue to drop before any offers are made.
In most MLS’s, your stats do not reset unless you remove your listing for 31 days. In the above example of the home that has been on the market for 244 days, the homeowner is better off removing their listing and resetting their stats. A good strategy here would be to re-list and start fresh at a new list price of $859,000. If the home sits again for 15-20 days, the home owner can drop it $4,000.The decrease won’t look as extreme. This strategy probably should have been implemented around 120 days. What will more than likely happen is this home will take another price decrease or receive an offer well below the current list. My guess is it will be a combination of both.
Pricing Your Home is an Art and Science. But Mostly Science
Real estate works like most things we purchase in our daily lives. Markets are controlled by supply and demand. If avocados are plentiful and the most a market will pay for them is $.50, then the market will pay $.50 for avocados. Just because you personally feel the avocado is worth $1.50 does not mean you will be able to sell it for $1.50. Using good data and pricing your home objectively will usually lead to optimal outcomes. Pricing correctly early and having a game plan will help reduce stress and maximize your sale price.
One of the tools that BlueMatch provides free of charge is out HouseCanary High Confidence integration. HouseCanary primarily builds software for the appraisal industry so they look at your home the same way an appraiser would look at your home. Although HouseCanary isn’t perfect, it is a great tool in assisting you with pricing your home.
Home Pricing Mistakes to Avoid
One of the biggest mistakes we see people make at BlueMatch is using bad data or lack thereof. Our clients will list their homes and use Zillow’s Zestimate without much thought. In some rare cases in our experience, Zillow’s Zestimate is fairly close. In most cases however, the price can deviate up or down by as much as 15%. To put it in perspective, a poor Zillow Zestimate can have a home worth $500,000, overpriced by as much as $75,000. This can significantly hurt your sale when buyers see price drops swing this hard.
As mentioned above, BlueMatch integrates with HouseCanary. Combining this data with the expertise of a pro, should set you up for success. Choosing that professional however is a task in itself. Not all real estate agents are created equal. At BlueMatch, our agents close in 2 weeks what the industry average closes in one year. When you take expert advise, make sure the person providing the advice is an expert.
Vetting agents on Zillow is a great place to start. Zillow displays transactional history and current listings of each agent. If an agent has only closed 20 or less deals in the last 12 months or has less than 4-8 active listings, they may not be the best candidate to price your home. The same is true in other industries. An attorney who has been to trial 1,000 times is going to have much more experience and expertise over the attorney who just graduated law school.
How to Price Your Home as a For Sale by Owner
When a FSBO signs up with BlueMatch, one of the biggest issues the ran into when attempting to sell on their own was pricing their house. If you decide to go the for sale by owner route, pricing can be tricky but not impossible. For one, you can start by using BlueMatch’s HouseCanary integration to find a good starting point. Once you have a good starting point, you can work on preparing your own comps.
One way to do so is to use Realtor.com to search all homes recently sold within .25 to .5 miles of your home. Search for homes with similar finishes, square footage, layout, bed/bath, etc. Get an average and median price per SF and compare it to what you are looking to price your home at. If you are way out of line with your area and your automated comps, you may want to reconsider changing your price.
Planning a good strategy around pricing your home and pricing it objectively can make or break a great sale. If you are looking for pricing assistance, our team is always standing by to help. You can reach out 7 days a week if you find yourself in a pricing predicament. Happy Selling!