Overpriced properties are part of life, but in today’s market with inventory beginning to increase, it is very important to have a reasonable list price. Yes, it is still a Seller’s market in the Sacramento area, but the trend has begun to shift over the past few months. It’s definitely no longer a “price it however high you want and you’ll get 25 offers at that price” type of market. Let’s consider two recent examples of overpriced properties and then look at some bits of advice for proper pricing.
The very highest sale in this condo subdivision in the Sacramento area is $150,000. But the subject property was marketed 13% above the highest sale. This condo has nice updates of course, but the lone sale at $150,000 was also fully renovated. Has the market appreciated by 13% over the past few months or might the price on this property be too aggressive for the current market? This graph alone helps tell a compelling value story for the neighborhood. Market data, comps and current listings simply do not support a value at $170,000.
Does it look like this property is worth anywhere close to $150,000? In the past four years there have been zero sales at $150,000 in the neighborhood. Of course there are always properties that can sell higher than anything else because they are unique, but the subject property is very plain. In fact, after I was hired to do an appraisal for the buyer during this private sale, value was a whole lot closer to $100,000 instead of the contract price at $150,000.
Advice for Sellers When Listing a Property:
- Be realistic about your price.
- Be in touch with the market by looking at recent sales AND listings.
- Look at hyper-local neighborhood trends instead of only zip code real estate data that might not reflect your neighborhood.
- Remember that price per square foot can change dramatically depending on the size of the property. Smaller houses usually have a larger price per sq ft than larger homes. This means if your house is large, be careful about using price per square foot figures from a smaller model in the neighborhood to determine your list price.
- Forget about what Zillow says (read 10 appraisals vs. Zestimates).
- Remember that unless the buyer is paying cash, the buyer’s lender will want to see your property appraise for at least the contract price. If the buyer ended up making an offer at full price (and you know that price is totally unrealistic), expect to see a “low” appraisal.
- Ultimately if your property is overpriced, it might not sell. Moreover, if it sits on the market for too long, you can end up losing some of your bargaining power since buyers may likely offer at lower levels since they figure nobody has bitten at full price anyway.
Question: Any thoughts, stories or other bits of advice to share? Comment below.
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Jana Hristova says
Ryan, it’s interesting to see how close the Tampa Bay market resembles yours. Here the cooling off started in June. The inventory in Hillsborough county has been going up from 4,350 active properties in June to 5,079 as of now. I am not sure if this is a seasonal story, it really doesn’t feel that way.
I think we will see prices going down somewhat. The question is would they just correct to take out that crazy appreciation of almost 15% last year or would they continue going down.
Ryan Lundquist says
It’s interesting to hear about your market Jana. Thank you so much for sharing. There are definitely parallels between markets that were hit hard when the “bubble” burst and the past year of appreciation. Investors tended to enter these markets at enormous rates, so similar stats and trends are showing up. We shall see.