Recently, I came across two very different types of listings for sale in the market.
There are properties that are on hold for a week, actually off the shelf.
And there are listings that grow on the market for months with little to no action.
Often, the difference is in the price, not the quality or amenities of the home.
So if you’re serious about selling in today’s housing market, think low instead of high.
Choose a Listing Price Below the Zestimate or Redfin Average
One of the easiest ways to get the most out of your home is to simply price it right.
This usually involves listing it at a lower price versus a higher price. But what is low and what is high?
Of course, your real estate agent should be able to help you with that, but there are also easy pointers to find this out.
Most properties have a Zestimate associated with them, which is Zillow’s estimate of the home’s market value.
No, it’s not an actual home inspection, and it can’t be used as a substitute for an appraisal, but it’s usually a good starting point to determine value.
A similar feature can be found on Redfin and is known as Redfin Estimate. Same concept, just a different company.
And even a Realtor has what’s called a “RealEstimate,” which combines three different estimates of a home’s value.
Sometimes these rates are higher or lower than others. For example, your Zestimate may be lower than your Redfin Estimate. Or vice versa.
However, a good agent will look at comparable sales in nearby properties that have recently sold when determining a good listing price.
They may also tell you to ignore Zestimate or Redfin Estimate and that it’s inaccurate, blah blah.
But, and this is the most important detail, is your prospective buyer going to look at the latest comps or are they going to look at the Zestimate? Chances are it will be the latter.
Why? Because they are consumers and these types of estimates are 100% aimed at consumers, called home consumers. They are quick and dirty and popular and easy to wrap one’s head around.
Digging into the actual sales comps is a very involved process and can go over a buyer’s head.
Let’s Consider an Example
I just came across a property that was pending for about nine days. That’s good, as it’s been a very tough year for the housing market.
The combination of high mortgage rates (compared to recent years) and still rising housing prices have made it very difficult to buy.
At the same time, listing in November or December is not ideal as there will usually be fewer buyers on the market.
After all, they will focus more on end of year things, shopping, vacations, travel, etc. Weather can also play a role.
Despite this, the location in Southern California went from being listed to waiting in nine days.
And if you look at the list price compared to Zestimate and Redfin Estimate, it was priced just below.
This is important because as potential buyers read the listing, they will see these ratings. And it will tell them if the list price is below or above the estimated price.
People’s psychology will tell them it’s a deal if it’s priced below average. Like any other product you buy, it will be considered “on sale” or “discounted.”
No different than a pair of shoes that are 20% off, it will feel like you’re getting more for less.
Conversely, if it shows a list price above average, that buyer may be turned off and feel that the seller is greedy.
This may cause the buyer to move on and consider other properties instead.
Also Make Sure The Price Is Below Important Thresholds
Besides listing under Zestimate, it may also be useful to list below the main price limit.
For example, if the Zestimate is $1,520,000, going with the list price of $1,499,000 accomplishes two things at once.
You get it under Zestimate and get it for less than $1,500,000, which is probably the maximum value for the user in their application settings.
This can make room for many users who may have their settings adjusted to only see properties listed for sale under $1,500,000.
If you were to put $1,505,000, which is below the Zestimate, other users would miss your property, even if it was affordable to them.
Similarly, if the Zestimate is $520,000, a listing at $499,000 would achieve the same result.
And if you’re worried about the property selling for less because of a lower listing price, that may not be the case.
Generally, you can get more interest for your listing if it is priced lower, and possibly get more bids, better terms, etc.
It can be very dangerous to list high, watch the property sit on the market, then be forced to apply for a price reduction and end up in the same place.
Why Are Not More People Doing This?
A common concern of real estate agents is that their client did not listen to their advice on setting a price.
In other words, the seller wanted to list you more than the agent. Look, right?
From the agent’s point of view, the low list price does not result in a very small commission because they only receive 2-3% of the sale price. So if it’s $50,000 less, their cut may only be about $1,000.
But for a retailer, every dollar counts. It could be less than $50,000!
However, it can get worse if the property sits on the market for months. As for why sellers list at the top, my guess is that they tend to be sellers.
See the will they sell, but they don’t make must sell. So they will throw the asset at the top end of the price range and wait and see.
Usually, this causes a lot of waiting, and finally you see that nothing happened. Still listed months later with few to zero bites.
Of course, they may not care about all that as these types of sellers are just testing the waters and they are not all that bad.
Read on: It’s OK to Talk to Your Real Estate Agent
Before creating this site, I worked as an account manager for a real estate broker in Los Angeles. My experiences in the early 2000s inspired me to start writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the mortgage process. Follow me on Twitter for the latest.
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