Recently, I’ve encountered two very different types of for-sale listings in the market.
There are the properties that go pending in about a week, essentially flying off the shelf.
And there are the listings that fester on the market for months with little to no action.
Often, the difference is simply in the price, not the quality or amenities of the home.
So if you’re serious about selling in today’s housing market, think lower instead of higher.
Choose a Listing Price Below the Zestimate or Redfin Estimate
One of the easiest ways to drum up a lot of excitement for your home is to simply price it right.
This generally entails listing it for a lower price versus a higher price. But what’s low and what’s high?
Well, your real estate agent should be able to help you out on that one, but there are also simple clues to figure this out.
Most properties have an associated Zestimate, which is Zillow’s estimate of a home’s market value.
No, it’s not an actual home appraisal, nor can it be used in lieu of an appraisal, but it’s often a decent starting point to determine value.
The same feature can be found on Redfin and is known as a Redfin Estimate. Same concept, just a different company.
And even Realtor has its so-called “RealEstimate,” which features three different home value estimates.
Sometimes these estimates are higher or lower than the other. For example, your Zestimate might be lower than your Redfin Estimate. Or vice versa.
Anyway, a good agent will look at sales comparables in the immediate area that sold recently when determining a good listing price.
They may also tell you to ignore the Zestimate or Redfin Estimate and that it’s not accurate, blah blah.
But, and this a very important detail, will your prospective buyer look at recent comps or will they look at the Zestimate? Chances are it’ll be the latter.
Why? Because they are consumers and these types of estimates are 100% geared toward consumers, aka home buyers. They are quick and dirty and well-known and easy to wrap one’s head around.
Digging into actual sales comps is a more involved process and one that could go over a buyer’s head.
Let’s Consider an Example
I recently came across a property that was pending in about nine days. That’s pretty darn good, given it’s been very tough year for the housing market.
A combination of high mortgage rates (relative to recent years) and still-rising home prices has put a major strain on affordability.
At the same time, listing in November or December typically isn’t ideal as there will usually be fewer buyers in the market.
After all, they’ll be more focused on year-end stuff, shopping, holidays, traveling, etc. The weather could also play a role.
Despite this, a property in Southern California went from list to pending in nine days.
And if you look at the list price compared to the Zestimate and Redfin Estimate, it was priced just below.
This matters because as prospective buyers peruse listings, they will see these estimates. And it will tell them if the list price is below or above the estimated value.
Human psychology will tell them it’s a deal if it’s priced below the estimate. Just like any other product you buy, it will be perceived to be “on sale” or “discounted.”
No different than a pair of shoes that are 20% off, it’ll feel like you’re getting more for less.
Conversely, if it shows the list price above the estimate, that buyer might be turned off and feel the seller is being greedy.
This could result in the buyer moving on and considering other properties instead.
Also Make Sure the Price Is Below Key Thresholds
Other than listing below the Zestimate, it can also be helpful to list below a key pricing threshold.
For example, if the Zestimate is $1,520,000, going with a list price of $1,499,000 accomplishes two things at once.
You get it below the Zestimate and you get it below $1,500,000, which might be a user’s maximum price in their app settings.
This could open up the property to more users who may have their setting adjusted to only see properties listed for sale under $1,500,000.
If you were to put $1,505,000, which is still below the Zestimate, some users could miss your property, even if it were affordable to them.
Similarly, if the Zestimate is say $520,000, listing at $499,000 could accomplish the same result.
And if you’re worried about the property selling for less due to a lower listing price, that might not actually be the case.
Often, you can garner more interest for your listing if it’s priced lower, and possibly get multiple bids, better terms, etc.
It can actually be riskier to list high, watch the property sit on the market, then be forced to apply a price reduction and wind up in a similar place.
Why Aren’t More People Doing This?
A common gripe from real estate agents is that their client didn’t listen to their advice on setting the listing price.
In other words, the seller wanted to list it for more than the agent. Go figure, right?
From the agent’s point of view, a lower list price doesn’t result in a much smaller commission because they only earn 2-3% of the sales price. So if it’s $50,000 less, their cut might only be about $1,000.
But for the seller, every dollar counts. It’s potentially $50,000 less!
However, it could be even worse if the property sits on the market for months. As for why sellers are listing high, my guess is they’re often would-be sellers.
They will sell, but they don’t have to sell. So they’ll throw the property up on the high end of the price range and wait and see.
Often, this results in a lot of waiting, and eventually seeing that nothing has happened. It’s still listed months later with few to zero bites.
Of course, they might not care all that much since these types of sellers are merely just testing the waters and aren’t all that serious.
Read on: It’s Okay to Negotiate with Your Real Estate Agent
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.