Ginny…How can I really determine what my property is worth? Here is the situation: An online estimate website says my property is worth $230,000, but my agent says it’s worth only $200,000! I’m listed at $225,000, and my price is comparable to other comparable listings. I really get the feeling agents are lowballing sellers to get an easy listing and sale. What’s your input on this? — Sandy H., New Orleans, LA
Sandy… The only way to know with 100 percent certainty what your home is currently worth is, bizarrely enough, to sell it! In real estate, we define the value of a home at any given time as the price that a willing, qualified buyer is willing to pay for it, something you can’t know until you list and sell it. Without doing that, all you can do is estimate your home’s value, and obtain professional estimates of it, based on what other buyers have recently paid for similar, nearby homes.
As you are well aware, because homes vary, these estimates can and almost invariably do vary widely — they are essentially opinions, more or less qualified, and based more or less in fact. Additionally, most opinions of value will be expressed in a price range, rather than a particular number, because of the fuzzy nature of the whole exercise.
1. Online estimates and appraisals have their own issues. Online estimates can be a useful tool for a rough-and-dirty estimate, but they have a variety of issues, too. The computer simply cannot appreciate all the nuances of location, home style and home condition that a human being can, and they frequently fail to detect flat-out errors in the public record details about your home or the comparable properties it chooses to use. Some of the most popular automated estimate tools online actually acknowledge a very, very high error rate.
On the other hand, some would tell you to shell out a couple hundred bucks to get an appraisal. Fact is, an appraisal is simply one more form of opinion. And appraisers on today’s market are generally under pressure to be very, very conservative in their home estimates; one of the most common reasons home-sale transactions fall out of escrow today is because the appraiser’s opinion was lower than the price that the buyer and seller agreed upon!
So, if you’re simply looking for a higher number than what your agent is giving you, I’d hate to see you shell out good money trying to get that from an appraiser, as it’s very unlikely. (Also, in some states, a recent appraisal report would become a document you are required to disclose and pass on to a future buyer; if the appraiser does happen to give you a low appraisal that you think is wrong, you might just impair your own ability to sell it at a higher price.)
2. Agents don’t lowball to get listings. Generally speaking, I believe that one way to get to a closer idea of what your home might actually sell for is to ask multiple agents who are successfully selling homes in your neighborhood on today’s market. If you can get a relatively unanimous range or estimate of your home’s value from agents, it behooves you to take that number seriously.
But as a point of clarification, agents don’t lowball sellers to score listings. In fact, the opposite is true: Most sellers want to hear that their home is worth a lot, and many will actually choose to work with whatever agent gives them the highest estimate of its value.
There are some unscrupulous agents who specifically, intentionally overestimate the value of a home in their conversations with the seller to get the seller to sign their listing agreement. Then they let the overpriced home sit on the market until the seller becomes exasperated, desperate or more motivated and convince them to lower the price.
It’s not in an agent’s favor, in terms of scoring your listing, to give you a lowball estimate of your home. And I like to say that when a salesperson tells you something that is against his short-term best interests, that something he’s telling you is probably the truth. But let’s be clear: There is a long-term advantage for agents who dole out this painful flavor of honesty at the listing appointment, and it’s an advantage that is aligned with the best interests of their seller clients.
These agents who provide what seems to you to be a low value on the property are mostly motivated to get the place sold.
First, agents know this: They don’t make a commission on homes that don’t sell. And overpriced homes simply don’t sell. What these honest agents also know is that to get even a properly priced home to sell, it will take a fairly substantial investment of their own time, energy and money — these are resources they would rather not invest in a listing that will never sell because the seller is fixated on a too-high list price. So agents these days have doubled-down on a strategy that is hard in the short term, but pulls in favor of success on the horizon: brutal honesty.
Second, agents with thriving businesses in today’s market have them because they have a strong track record of getting their listings sold. Most would rather not list a home that is destined to lag on the market because of its price, because (a) the unhappy seller will likely not say good things, and (b) they’d rather be able to show future prospective seller clients a portfolio of homes that have recently sold, quickly and for a price near the list price.
3. Your list price is not only about worth, it’s also about marketing. On some level the lengths to which you go to obtain a firm and precise opinion of your home’s value should be driven by what your purpose is for the estimate. It sounds like you’re trying to evaluate the list price of your home. Keep in mind that the list price of your home is as much about marketing and competitively positioning it against other listings as it is about trying to approximate it’s true worth.
In fact, many agents start the list-price conversation at what you believe it’s worth, then take a tad bit off to entice buyers to come see and make offers on the home.
If you are priced right in line with other listings, that might make you feel like $225,000 is the right price. But I’d suggest that you look at how long those listings have been on the market. I used to advise my sellers to list competitively not with homes that are still on the market (because that’s not the result you want) but with the homes that have recently sold (because that’s what you’re trying to do).
In the same vein, if your home has been sitting on the market at $225,000 for longer than it takes the average home in your area to sell at $225,000, and hasn’t sold, you may need to do something different. And think of it this way: If you want to distinguish yourself from those listings and beat them at the competitive endeavor of luring a buyer in, you might need to be priced better than them.
If you were a buyer, you’d be much more interested in the listing that had all the same features and a lower price, wouldn’t you?