pricing

My advice? Don’t choose your own price.

My advice? Don’t choose your own price.

It’s very tempting to want to choose your own price. There’s all that information out there on the web, real estate portals, town market updates, newspaper articles and much more. There’s also your friends and the neighbor who sold their house five years ago in a different market. Usually when people call me in to list their home they have already scoured all the information available and come up with their own idea of what the price should be. It’s been my experience that sometimes they can be right, but most times their price is not right for current market conditions.

Your friends and neighbors, when they find out you are selling your house, will all have an opinion … which is usually based on some anecdotal data they heard from a third party or based on their experiences. They often are much higher than your house is really worth, but it makes you feel good to hear it and you soon start believing it yourself.

Next is the elephant in the room, the zillow “zestimate”. According to a recent article in the Boston Globe, a zestimate is not the price that your home is really worth. They quoted Cory Hopkins, Zillow’s public relations manager for data, who said” a zestimate is a starting point and should be used in conjunction with guidance from local real estate professionals who understand the market and know your property.” Bottom line, until a computer algorythm like this can go inside your home and compare it with similar homes it has also been inside, the results it predicts are suspect.

As I like to say, pricing is 50% science and 50% experience. The data available to the public is usually about a month behind the market, because “sales” don’t get recorded until the money and deeds actually change hands. This can often be 45-60 days after a property has accepted an offer so while in slow markets this is fine in hot markets you might be leaving money on the table if you’re using stale data. Local professionals are right on top of the market to today, so they know what has sold and approximately for how much well before the data becomes public. This is power to be used for your advantage.

To set your price I use a clearly defined process that is repeatable and yields consistent, accurate results, (my list-to-sale ratio is 96%, industry average is 92%) here’s how it works:

First, I have to walk through your home in order to put a price on it. This is usually a half-hour exercise, but is very important to the process.

I then use the information I collect, such as updates, additions and improvements and compare your home with other houses that I have been inside with similar fits and finishes. If I can’t find ones I have been inside I often make arrangements with the realtors or homeowners to do a quick tour to be sure that I’m really comparing your house to comparable properties. No amount of clicking on internet sites can replace this experience.

Once I have evaluated your house versus the comps I will make adjustments for many variables (that matter to buyers looking for a house like yours), such as: living area square footage; lot size; number of bedrooms and baths; garage spaces; and location. After the adjustments are made most people stop and decide that this is what the price should be.

The last step is to position your house within the market. A house is worth what somebody will pay for it and what somebody will sell it for, we call that a “meeting of the minds”. So, it is important to know who is out there looking for a home like yours and who your competition will be. One useful market statistic is called the Absorption Rate. This compares the number of properties currently on the market with the number of properties sold within the last year in a given price point. If there are more properties than buyers it’s a buyer’s market and if there are more buyers than properties it’s a seller’s market (we like those).

Once this analysis is complete I will give you a price that I think a buyer will probably pay for your home in today’s market.

In summary, don’t chose your own price, leave that to a professional … Mike Hunter.

Using Zillow? You Might Be Surprized.

Using Zillow? You Might Be Surprized.

Why Zillow can get your home value wrong

While I personally believe that Zillow is an awesome product and enjoy the creative thinking that has surrounded it, there are a few things that you need to know when using their estimates of home value, or what they call “zestimates”.

They use public records instead of multiple listing service data. Depending on the town or city your home is located in, the public records are notoriously inaccurate, especially when it comes to finished area and living area.

Multiple listing service data is entered by realtors who are responsible for the accuracy and while it can also be imperfect, the MLS data is much more likely to be correct.

Because the algorithms in Zillow are heavily reliant on living area and cost per square foot, these public record inaccuracies can introduce a statistically significant degree of error into their estimate of home value.

They use a radial distance from the house location to select comparable home sales in the vicinity.

In other words, they will select all houses within a half-mile radius of the subject property that have been sold within the last 6 months.

While this makes absolute sense, mathematically, it doesn’t make sense in the real world.

The reason is, that if a property is on the edge of two different zip codes of highly differing socioeconomic strata and real estate values, the results will introduce a statistically significant degree of error into their estimate of home value.

For example, a house in South Wayland commands considerably more in price than a house in North Framingham, but Zillow will include houses in North Framingham that are within a half-mile of the Wayland house when figuring their “zestimate”.

Zillow is very good at analyzing quantitative factors (facts) but doesn’t yet have the capacity to include qualitative (feelings) factors, what we realtors call the full 360 degrees.

There are a number of highly subjective factors that help to determine a home’s value, and these factors are constantly changing with trends and popularity of … colors, materials, lifestyles and family makeup, just to name a few.

And last, just as you can check-out a car on many great websites, commercials, movies and in pictures, you don’t really know how you’d like it until you drive it.

Imagine yourself test-driving dozens of cars and then comparing them with someone else who’s only looked at them on websites, who’s opinion of value/drivability/comfort do you think would be more accurate?

So in summary, I believe that Zillow is a great website and I think it is very good at coming up with a blazingly fast sweeping generality of a home’s value. But in its present form, it will not replace the complete market analysis of an experienced, full-time professional realtor.

For a really accurate market analysis of your home by Mike Hunter contact me, I’ll be glad to help you.

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