What Is The Value Of Your Home?
– Are you a homeowner that is guilty of overestimating your home’s value? If so, you are like so many others. Many homeowners overvalue their home over what a buyer would actually pay for it. The Journal of Housing Economics recently published a statistical study showing that homeowners “overestimate the value of their properties by about 8 percent.” By conducting an overvaluation, a homeowner can have unrealistic expectations as to what sales price the property will actually bring.
A separate study by Quicken Loans showed that there was a “widening gap” across the country for what a homeowner believes their home to be worth versus the actual market value. This data compared estimates that refinance applicants had provided for their home value versus what an appraised value showed. Topping the list of why a homeowner overvalues their home is the value that was put on home improvements made and the resulting effect on the resale value of the property. While a homeowner may pay $16,000 for a mid-range bathroom remodel, it’s not the money that one puts into a property that is returned. On average, a bathroom remodel has an ROI of about 72.5 percent which equates to a resale value of only $11,600. Another example is a major kitchen remodel which costs almost $57,000 on average and only results in a 67.8 percent return for resale value. That’s only $38,646 in a resale value returned. In home improvements, it’s not always what you put into it that you get out. Dollar-for-dollar returns are not the norm and many home improvements don’t result in a return of what was paid for them.
Homeowners also mistakenly make improvements that are not the norm in a neighborhood. Meaning they over-improve. Highly personalized items are also a downfall that many homeowners make in a home. For instance, what may be the taste of the homeowner to have an indoor luxury spa may not appeal to many homebuyers nor add anything to the resale value of the property.
Making an Informed Pricing Decision
Homeowners don’t necessarily have all of the necessary data to make an informed pricing decision on their home. Especially one that is without bias. Whereas, a professional real estate agent or appraiser can make an informed conclusion as to what a good market value would be on a home based on recent comparable sales and other market statistics. Homeowners have an emotional attachment to their home and, therefore, may overestimate its value. We find popular websites such as Realtor.com and Trulia that market their “What’s My Home Worth” and Zillow’s “Zestimate” tool that many homeowners utilize as a way to make a pricing decision on their home. While these services do offer some clout when it comes to pricing, no pricing estimate is better than what a realtor or appraiser can prepare.
Listen to a Professional
When selling a property, over 75 percent of a home’s marketing revolves around setting the appropriate price that meets market conditions. Many sellers do their own market research when determining a price for their property whether they are listing with an agent, estate sale or doing a For Sale By Owner (FSBO). A realtor’s advice is often ignored and many homeowners will even go as far as selecting a different listing agent just due to the fact that the agent either provided them with a higher price estimate on what the home is worth or agreed to go with the pricing that the seller wanted on the property. Furthermore, many sellers overprice their home when selling to compensate to pay for the commission. Some agents are so hungry for a listing that they will take an overpriced listing in hopes of talking the seller into the reducing price of the property after it has been a couple of weeks and no to little market activity has been seen. An overpriced home can get a stigma within the market though and, even if the price is later reduced, it may still has the original price attached to it. Most properties see the majority of traffic within the first three weeks of listing. So, if the home is overpriced, then it won’t be properly considered from the start. Comparable market data doesn’t lie and a competitively priced home is what will get a home sold. Overpricing a home to match what a homeowner’s idea of pricing can be a huge downfall when trying to sell a property promptly.
Estate SalesWhat Is The Value Of Your Home?