FSBO Pricing Strategies
Most FSBO sellers go the DIY route because they want to save money. Saving money does not mean that you have to approach the task of selling your home blindly though. In my 25+ years of appraisal experience I have done a lot of pre-listing appraisals for sellers who thought they were pricing their home correctly, but found out too late that they were off base when their home just sat on the market.
Today I want to share with you some of the approaches these FSBO sellers took, and that they later found out was not the best strategy to use. I hope that you can learn from their mistakes so that you have a positive FSBO experience by selling your home for the highest amount that the market will support and in the most reasonable amount of time.
Top 5 FSBO strategies you shouldn’t use
1- Price your home at its assessment value: This might seem reasonable at first but it’s not really a good idea. The methods that county assessors use to arrive at a value for your home is different than what a fee appraiser uses.
All appraisers learn about the three approaches to value: sales, cost, and income, however the way that the appraiser uses it is different. A county assessor uses mass appraisal methods by looking at a large number of sales and then applying what they found to your home, however their information on your home could be incorrect. Mosts county assessors do not have detailed information about your home so their values can be off.
An appraiser that comes to your home and measures it and takes detailed notes is going to be able to provide a more accurate indication of value. Their comparable sales selection will also be more accurate because they will be hand picked to more closely match the physical characteristics of your home.
2- I’ll price it at what my neighbor did: During an FSBO appraisal assignment the owner told me that they originally priced their home at a similar price as what their neighbor had told them that their home had sold for. The only problem with this is that the neighbor had “puffed up” their price and my client had not verified what the sold price was.
Sometimes the price that your neighbor tells you is not always correct. People have a way of telling little white lies to make themselves look better. This neighbor had embellished a little on the price to make themselves feel better so it was not an accurate indication of what my client could sell their house for.
After being on the market for longer than normal they decided to get an appraisal to see how it compared to what they had it listed at. During my research I found out the true price of the neighbors sale, which was lower than thought. After completing the appraisal my client revised his listing price and sold the home shortly thereafter.
The moral of this story is to verify through county records anything you’ve been told to make sure you are pricing your home using the most accurate information.
3- I’ll price it at what my refinance appraisal from last year showed: I’ve been asked on many occasions how long an appraisal is good for and my go to answer is that it’s good for one day: the day that I am there.
You may think that this is a smart aleck answer but it’s not meant to be. Technically speaking the value is only good for that day because many things could happen to the home or to the real estate market. The home could experience a fire or the local real estate market could take a dive, which would affect the value of the home.
It is reasonable to assume that if nothing drastic happens that the value may be accurate for at least a short period after the appraisal is completed. While this is true you also have to take into consideration other homes that come onto the market after the appraisal and their impact on your home’s value. A good pre-listing appraisal will consider recent closed sales as well as current active listings.
4- I’ll price it by looking at how much money I’ve got in it: Wrong! Sorry for the outburst but this is one of my pet peeves because it is used by so many people to estimate the value of their home.
I know, I am a homeowner too. I don’t want to lose any money and want to recoup all that I have invested in my home but that is not always the way it works out. It’s important to keep in mind that cost does not always equal value, there is the cost of an item and then there is the markets perceived value of that item. It might cost $25,000-$30,000 to install an inground pool but you may only get $15,000-$20,000 out of it when you go to sell.
This is one of the appraisers important tasks when doing an appraisal. The adjustments you see in an appraisal are the markets reaction to that feature and this can change from location to location as well as over time. An up to date appraisal will give you the best indication of value for your home under the current market conditions.
5- I’ll use Zillow because they’re always accurate: Wrong again!! Sorry for that second outburst but I guess #4 was really not my biggest pet peeve, but Zillow is.
I’ll give credit where credit is due but the zestimate is not where it’s at. Zillow does a good job reporting the sales prices of local homes and they also provide helpful pricing trends. Zillow does not do a good job of estimating your home’s value however because they utilize inaccurate information.
There are many reasons why Zillow zestimates aren’t accurate and you can read about them in a past article I wrote but the bottom line is that their accuracy leaves a lot to be desired. Neither buyers nor sellers should rely on the zestimate but instead should rely on the experience of a local real estate appraiser that is more familiar with the market and can do the research and analysis necessary to arrive at a reliable opinion of value.
There is nothing wrong with being a FSBO seller but you should know the potential pitfalls and the due diligence you should take to make this endeavor as successful as possible.
Do you have any questions about being a FSBO seller? If so leave a comment below and I’ll do my best to answer it for you. As always, thank for reading.