You want to sell your home and get the most you can for it, right?
Where to start? Should you check out Zillow for their Zestimate on your home? Should you reach out to a professional real estate agent? What about appraisals? When do you take that route?
In this post, we will outline the differences between each valuation method and clue you in on another option that may surprise you and benefit you!
Let’s start with Zestimates.
A Zestimate is a home valuation generated by real estate company Zillow’s online tool. The thing with Zillow is that before a house is actually listed, Zestimates will not be an accurate reflection of the actual market value. For example, a home can be estimated on Zillow at $400,000 when in the real-time market, it is worth only $350,000. Interestingly, if the house will be listed at $300,000 Zillow’s Zestimate will suddenly dip to the range of $300,000. Once the home is listed, Zillow will adjust the Zestimate to a range closer to the listing price. So while it may be super convenient to spurn out an estimate at your fingertips, within seconds, bear in mind that it will likely be off target
Bottom line on Zestimates: Asking Zillow what your house is worth before it’s listed is worthless. The price will be either way above or below the actual market value.
Moving on to Agent’s Estimates.
Turning to an honest, professional agent seems to be the more prudent route. If the agent knows his work, within a week or two after your initial meeting, he’ll provide you with a CMA - a Comparative Market Analysis, a report that estimates your home's price based on recently sold, similar properties in your immediate area. The agent will use the CMA to name a price he feels confident listing. Most agents provide a CMA for free, especially if you will list the house with them.
Bottom line on Agent’s Estimates: A competent, reliable agent will provide you with a listing price that is usually in the accurate range although there may be deviations in some circumstances.
Now let’s examine Appraisals.
What is an appraisal? And when do you need one? A home appraisal is a valuation of a property conducted by a State certified appraiser, determining the home's value to ensure that the price reflects the home's condition, age, location, and features such as the number of bathrooms. (Not to be confused with inspections, which only determine the condition of the home and identify any potentially serious issues before a buyer moves forward with closing.)
Appraisals are almost always required by banks and lenders prior to authorizing a mortgage loan. Thus, appraisals are usually ordered and paid for by buyers, not sellers.
Bottom line on Appraisals: While appraisals provide a pretty accurate valuation of a property, it is usually conducted by the buyer at an advanced stage in the bidding process and thus don’t give sellers a projected listing price when putting the house on the market.
You may not know that there is another route that may be the most worthwhile.
Once you have a CMA, you now have a pretty accurate price range for the house you wish to sell. By the way, getting a CMA report from an agent does not bind you to sell through that agent. In fact, it is acceptable and advised to interview multiple agents and get multiple CMAs.
So, once you have a price estimate based on one or preferably several CMA reports, you can reach out to a cash buyer and ask them what they would offer for your house. You’d be surprised but often, it can be within the range of prices you were given by agents.
And remember, cash buyers won’t shave off any fees so you’ll be getting that entire sum, clear and fair.
To illustrate with an example.
Say, you interviewed four agents and based on the CMA’s they each provided, the asking price range for your home is between $330,000 and $350,000. In other words, the median price is $340,000. (In this example, we will assume that the house does not need repairs, so there will be no repair costs factored in. But bear in mind that in most instances, repair costs are very often part and parcel of the selling experience.)
You can now ask a cash buyer how much they would pay for your house.
Scenario 1:
Cash buyer says “We’ll buy your house for $340,000.”
If an agent will sell for that exact price, 6% will be shaved off for commissions.
6% of $340,000 is $20,400.
Aside for agent fees, there are additional closing costs such as lawyers’ fees, taxes etc. which are usually estimated at 1% of the selling price.
1% of $340,000 is $3,400.
So if you sell through the agent, you will pocket only $316,200. ($340,000 - $20,400 - $3,400)
Whereas if you sell it to the cash buyer, you will pocket the full $340,000.
In this case, selling to the cash buyer is a no-brainer. I mean, why would sell through an agent if you can pocket MORE money through a cash buyer?!
Scenario 2:
Cash buyer says “We’ll buy your house for $315,000.
OK, this is considerably less than the price range you’ve been given.
BUT, one minute! We already calculated that close to $25,000 will be shaved off if an agent clinches the ideal price of $340,000. Remember? So after agent and closing fees, you’ll be pocketing only $316,200.
In this case, you may want to ask the cash buyers if they would consider paying a bit more, say, $318,000.
And once again, you may be in for a surprise!
The cash buyer may agree and you’ll be pocketing $318,000 within a week or two instead of waiting months for an agent to find a buyer at the ideal price. And even when/if the agent finds a buyer at the ideal price (in the area of $340,000), you still may pocket less than $318,000!
