In today’s housing market, home prices are increasing at a slower pace (3.7%) than they have over the last eight years, during which time prices were increasing nationwide at a 6-7% rate. Low supply of listed homes and high demand from buyers has indeed, pushed prices to rise rapidly but, not in every price range and not nearly as high as they were, even last spring.
While home price appreciation over 6% feels like the new normal, it is not. This becomes a challenge when a homeowner looks to refinance or sell their home, as the homeowner’s expectation of what the homeowner believes the home should be worth does not line up with the market value.
Every month, the Home Price Perception Index (HPPI) measures the disparity between what a homeowner seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.
Over the last five months, the gap between the homeowner’s opinion and the buyers & bank’s values has widened considerably. This is important for homeowners to note, as even a 0.78% difference in appraisal or market value can mean a gap of tens of thousands of dollars between the seller’s pricing and the real value.
The chart below illustrates the changes in home price estimates over the last 12 months.
As you can see, the numbers tell the story, as does the timeline.
I sell a good number of homes in Charlotte’s trendy historic district so, being a numbers geek and following the trends as closely as I do, I am very aware of this phenomenon. In fact, I just checked the data in one of those communities and noted that of the current listings, during the last 7 days, 5 home sellers have had to take a price reduction. Last year this time, price reductions were virtually unheard of. Not only did the community have 5 price reductions but, one listing expired – another thing that was unheard of last year.
Don’t be stubborn! Listen to the expert when it comes to pricing your Charlotte home for sale – if you don’t trust your agent, have an objective appraisal done on your home! It could very well be the best $500 you’ve ever spent!
* $500 is the approximate cost of an appraisal in 2019.
What REALLY happens when you overprice your home right out of the gate?
1. You may be lucky enough to receive a low-ball Offer or two. Yes, when this happens within the first week of being listed on the market, you really should pay attention to the message. Don’t shoot the messenger but, I’ve seen overpricing turn very ugly – especially just prior to the recession or a correction in the market.
2. You receive NO Offers and your home sits on the market for months…and sometimes longer. Yes, even in this market, pricing is everything. Just as we are moving towards a correction, realistic pricing is imperative to your success. If you are not receiving Offers or possibly not even any showings, you need to adjust your price. If you are getting no showings, chances are, you need to adjust your price significantly.
3. Lastly, you’re wise enough to see that your home hasn’t sold because you overpriced it originally and you correct your price – even significantly. What happens then? Buyers wonder what is wrong with your house that no one submitted an Offer that would cover your mortgage payoff AND put some equity in your bank account for your next home. Otherwise, surely you would have taken one of those Offers, right? So, at the risk of having to overcome something major that is surely wrong with the home, buyers will low-ball once again. The irony of it all is, this low-ball Offer is even lower than the first one you received when you first listed your home – if you were lucky enough to receive one!
Sellers, pricing is THE most critical thing you can do to sell your home and capture the equity you have within. When your agent suggests that you price your home higher than you think you should, have an appraisal done – again, that could be the best money you’ll ever spend when it comes to a successful home sale. Conversely, if your agent gives you a price and shows you the data to back that price up and it’s less than you were ‘hoping’ to sell for, listen to your agent!
As well, just because you want to spend more on a new home and ‘need’ more equity out of your current home to purchase a higher priced home, that should not impact your pricing. This is not the way economics works, nor is it how selling real estate works. If you have money in the stock market, you are well aware that this is not how investments work and your home is likely one of your largest investments, if not the biggest one.
Need help pricing your home for the market? I can help! Call or text me and let’s talk!
Searching for a home in Charlotte’s historic district? Give me a call or shoot me a text at (704) 491-3310. Find homes for sale in these communities below…
© Debe Maxwell | The Maxwell House Group | RE/MAX Executive | CharlotteBroker@icloud.com | The Disadvantages of Pricing Your Charlotte Home Too High