Pricing your home correctly is probably the most important aspect of the home-selling process. List it too high and you won’t get any interest from buyers, list it too low and you risk leaving money on the table.
There’s a lot of misinformation about how to price a home correctly and a lot of Realtors use the age-old trick of telling you what you want to hear, even if it’s not in your best interest. Let’s take a closer look at how to price your home to sell quickly all while ensuring you’re not leaving money on the table.
The Goldilocks Price: Not Too High, Not Too Low
Pricing your home correctly requires compromise. At the end of the day, a home is worth what a buyer is willing to pay for it. Price your home too high and buyers will overlook it. This is a big mistake a lot of homeowners and Realtors make. After all, interest in a home’s listing trails off sharply after about three weeks. That’s only 21 days!
Pricing your home too low could cause just as disastrous results. Yes, you will likely sell quickly but you may be leaving tens of thousands of dollars on the table. It’s no secret that the goal of any respected Realtor is to help you price your home in the goldilocks range but not all Realtors are created equal.
Using Data and Algorithms to Get an Estimate
Like I said, not all Realtors are created equal when determining a strategy for pricing your home. Some will cherry-pick what they tell you are ‘comparable homes’ or comps and others will seemingly pull a number out of thin air.
At Felix Homes, we rely on large data sets and advanced algorithms to get a rough estimate of what your home is worth. This method is called an ‘Automated Valuation Model’ or AVM and it’s a program that uses linear and multiple regressions to form an estimate of the property’s market value. Data analyzed can include the age of a home, market values, trends, historical data, property features and more.
There’s No Replacing the Human Element
Once we have a rough estimate provided by the AVM, it’s essential that we visit the home and get a sense of certain features that an AVM cannot analyze. For example, while AVMs are great at comparing thousands of past sales, there is no way for it to judge the condition of your particular home’s interior.
At Felix, that’s where our Home Selling Experts come into play. They’re trained to evaluate the condition of your floors, see if you have any scuffs or marks on your walls, learn what kind of countertops you have in your kitchen and find out if you have high-end appliances. In all, there are well over 150 criteria that our Home Selling Experts look for to help refine the value of your home.
Computer Algorithms + Human Element = Perfect Price
Now that your Felix Home Selling Expert has visited your home and knows the unique features and conditions of your property, their goal is to incorporate this knowledge and modify the value range that the AVM provided. For example, if you have granite countertops and walk-in closets, your home’s value will be adjusted up but if your home is also located on a main road and you don’t have a garage, then your valuation will be adjusted slightly downward.
Common Mistakes Home Owners Make
- Thinking the Zillow Zestimate is the value of their home. Yes, the Zestimate is a type of AVM and it can be a good estimate (in some cases) of what your home is worth. That said, there is no substitute for having a trained real estate professional visit your home for an in-depth valuation.
- 2. Thinking that the $20,000 renovation you did last year means your home should be worth $20,000 more. Renovations, additions, and customizations are nice. They’re what makes a house a home. That said, many renovations do not produce a positive ROI or Return on Investment.
- 3. Thinking your home is worth $350,000 because your neighbor’s home sold for $350,000. While these types of ‘comps’ can provide a good estimate, just because your neighbor’s home sold for $350K doesn’t mean your home is worth $350K. A home should be judged on a price per square foot basis so if your neighbor’s home sold for $120/sqft., your home may be worth $120/sqft. give or take.
- 4. Thinking your home is worth $30,000 more than it actually is. A lot of homeowners will overestimate what they think their home is worth. This is typical because the owner is attached to their home and who can really blame them? It’s like having a dog that is terribly ugly but in the eyes of its owner, it’s the cutest dog in the world.
- 5. Thinking your home is worth $500,000 because it’s insured for $500,000. Insurance companies have their own way of determining the value of a home and in many cases, it’s pretty similar to market value. That said, when selling your home, you’re entering into a market and like any good or service in a market, it’s only worth what someone is willing to pay for it.