All About Data: LIST PRICE

Welcome to the fourth installment of our series: All About Data!

Last week we discussed the trends we see in prices (click here for last week’s post); this week we’re talking about how sellers and their agents determine a LIST PRICE.

Setting an accurate list price is a difficult feat and setting the price too high or too low can have negative consequences for the seller. Setting a list price that is higher than the market will bear means a home will sit on the market for too long and potential buyers may not even consider it. Eventually the seller must either cut the price to induce more interest, or remove the listing from the market altogether. If the list price is too low, the home will get lots of attention and activity, but may ultimately sell for less than what the seller could have received for it.

Comparative Market Analysis

The first thing your agent should do when determining the list price is to find homes in your area that have sold recently that are similar to your home and see at what price they ultimately sold. This process is often called a Comparative Market Analysis or CMA. The homes listed on a CMA are called “comps” because they are comparable to the home being listed. A well done CMA gives the agent and seller an idea of what the “going rate” is for a home on the market, and that neighborhood specifically.

But, it doesn’t often happen that an identical home has sold within the previous three to six months (the ideal time frame for a CMA). So the agent must take the comps they can find and make value adjustments based on the differing features of the home to be listed. This process entails assigning a dollar value to any variations found between recently sold homes and the listing in question.

For example, a home of a similar age with similar square footage may have an additional bathroom. An experienced agent knows the approximate value an additional bathroom adds to a home in that neighborhood. They will also know that a second bathroom may add a different value than a fourth bathroom. This knowledge is why finding the right agent is so important.

What about Online Estimates?

Many websites offer ready-made estimates for what your home is worth. But how accurate are they? The algorithms these sites use are only as good as the data behind them. So the accuracy of your estimated home value will depend on how current the information is that they have. If you purchased your home three years ago and made no improvements, online estimates will be more accurate than if you’ve lived in your home for 10 years and updated important spaces like bathrooms or the kitchen.

These sites themselves tell the public that their valuations are starting points for determining value, not official appraisals. Zillow for example states on their website that for the Portland Metropolitan Area, “Zestimates” for homes not currently on the market have a median error rate of 5.6%. This means that only half of all Zestimates for off-market homes in Portland are within 5.6% of their true value. The Median Home Price in Portland last month was $479,100. So half of all Zestimates for off-market homes in that price range are off by at least $26,000.

While these online estimators can be a good starting point, they by no means are an accurate depiction of your home’s true value. To find out what your home is worth, you need to get a professional opinion.

What is a Good List Price?

As a buyer shopping for a home, how do you know if a home is appropriately priced? Right now in Portland there is a severe shortage of inventory, which has been pushing prices up. This means many (if not most) homes are selling for above their list price. And according to RMLS, for the last 8 months homes have been, on average, selling for more than list price. We expect this trend to continue as we enter the busiest months of Real Estate. So, determining if a listed price is appropriate can be tricky. As we see more and more multiple-offer situations and buyers competing for homes, the list price can often be a jumping off point for competition between buyers. An experienced and well-connected agent will be able to advise you on whether a property is priced well given current market conditions and how best to write a competitive offer.

Next time we will tackle statistics about LISTINGS including New Listings, Active Listings, and Pending Listings!

The content relating to real estate for sale on this website comes in part from the IDX program of the RMLS™ of Portland, Oregon. Real estate listings held by brokerage firms other than Think Real Estate are marked with the RMLS™ logo, and detailed information about these properties includes the names of the listing brokers. Listing content is copyright © 2020 RMLS™, Portland, Oregon.

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