How you price your home will determine if and how long it takes to sell. Pricing it well requires an in-depth understanding of our local real estate market conditions.
On average, in 2018, homes that had a price decrease were on market for 69 days and sold for $554 / square foot. Compare that to all homes that sold without a price decrease: on average, they were on the market for 17 days and sold for $586 / square foot. This suggest that, if homes are overpriced when they are first put on the market, they can take longer to sell and may sell for less.
Santa Cruz County Single Family Home, Condominium, and Townhome 2018 Sales, $300 thousand – $2 million, Without Listing Price Decrease
Santa Cruz County Single Family Home, Condominium, and Townhome 2018 Sales, $300 thousand – $2 million, With Listing Price Decrease
How To Determine Your Home’s Price
You may be wondering: “Can’t I just go to Zillow to determine how much my home is worth?” While Zillow’s zestimates can serve as a starting point for pricing your property, they are not a reliable source for determining an estimated fair market value. At the day of writing, the median error on Zestimates in Santa Cruz is 5.5%, meaning if you were to price your home anywhere between $700,000 and $1,000,000 the Zestimate will, on average, be off by $38,500 to $55,000. Compare that to our average List to Sales price ratio of 98%, or an average error of 2%. It is clear that the Zestimate is not the most reliable way to price your home. So what is?
The best way to determine a fair price for your home is to analyze the local market. Sold properties serve as “comparables”. Homes that are “of like kind” are ideal. For example, you want to find properties with a similar square footage and with comparable upgrades. You also want to find properties that sold, or were put into contract, as close to the present day as possible.
Unfortunately, this is not always possible. Sometimes all of the recent activity in the local market is comprised of sold properties that are nothing like your property (i.e. are much older and have no upgrades). At other times, something will look like a great comparable on the internet, but problems underneath the surface caused it to sell at a lower price.
In these situations, an in depth understanding of the market, the current inventory, and experience in making price adjustment accordingly is invaluable. This is why working with an experienced Broker who is not afraid to give you an honest opinion of price is an important
Other Considerations when Determining Price
Increasing the Value of Your Home
So let’s say you’ve talked to a Broker and the two of you have determined a fair price. How much return can you get from renovating, fixing up, or upgrading your home?
If you are considering working on your property before selling, take time to consider the highest-return projects.
Pricing Under-Market
Some have the logic that pricing your home under the market value may result in more activity and in a competitive market, a bidding war. However, pricing your home below market value can be risky.
Homes that are priced lower than the market-justifies may send a red flag to buyers that there is something wrong with the house. These properties will also attract those buying at a lower price-point. Additionally, when a buyer does come along, he or she may be unwilling to offer higher than the asking price if it is not a competitive situation.
While this strategy may work in certain markets, it is not a fail-proof way to get the most money for your property. We suggest discussing the current market conditions with your Broker, and having a realistic expectations about the risks and rewards associated with following this kind of strategy.