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Hello hello this is Stan McCune realtor
here in Greenville South Carolina and
thank you for tuning in to another
episode of selling Greenville your
favorite real estate podcast here in the
greater Greenville area of South
Carolina again I am your host realtor
Stan mun you can contact me with any of
my contact information in the show notes
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helps to educate more people about
Greenville real estate which helps all
of us you know it's a tide
that rises all boats the more we all
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area the better it is for all of us so
please go ahead and do that today we
have a relatively quick episode it's
kind of a second half a a sequel so to
speak to an episode that I did
really several months ago where I looked
at the data for what happens when you
overprice a
home and
really the the data itself I I let the
data speak for itself I don't read into
the data I simply do the best research I
can and then I extrapolate from that
research what conclusions I can I can
draw well I came to the conclusion
and when it comes to pricing your home
if you overprice your home you are very
consistently losing out big time
overpricing your home results in
a roughly if I remember correctly
roughly two months longer on the
market and you lose about $12 a square
foot compared to on average compared
to the other homes in the area that's a
lot of money you know multiply 12 time
2,000 ft you're talking about $24,000
potentially on a 2,000t home you don't
want to lose all that money today I
want to talk about what happens when you
under price your home all right what
happens when you underprice your home
and this is a a a little bit different
and and this the results kind of
surprise me a little bit now I am a big
fan personally of of generally speaking
you should price your home for what it's
worth now there is a range in which
we you know we can't determine exactly
what a home's worth but but we look at
the
range and the range kind of you know I
usually try to keep it within a a 10 to1
15,000 range and then we kind of look at
what is on the market to kind of
determine okay are we going to list at
the bottom part of that range or do you
think we can be aggressive we can try to
list more at the top part of that range
and so I I find very frequently that
if you wherever you kind of list it
often times that is where the offers
come in on unless it's a multiple offer
situation people will will kind of get
fixated on the list price so typically
it makes sense to price it for for what
it's worth unless you're you're
overpricing you've got to be careful
because like I said you overprice it
you're killing it you're you're killing
your home value you're going to end up
getting less than what it's worth well
what happens if you really underprice it
what I did was I looked at homes that
have sold the past six months now I need
to hedge this the past six months I I'm
going to have to come back to this data
at some point because the past six
months have been crazy this is a sellers
Market with a capital every letter every
letter in
sellers is capital right now we've
been in the low twos low ones sorry low
twos High ones in terms of monthly
inventory levels which is insane you
know it it had been for the previous
several years in the three
which was squarely a sellers market
and the twos and ones we've talked about
that in the past I'm not going to get
into all that the point
is this data might be a little bit
skewed towards the seller and we need to
revisit this at some point once the
market cools off a little bit which I
anticipate towards the end of the year
we're going to see a little bit of a
cool down of the market still sellers
Market just not quite as insane of a
sellers Market is what I think is going
to happen as the year goes
on so so I need to hedge it this is the
past 6 months and this might change a
little bit but I looked at homes that
sold in subdivisions so the reason why
we do this this is the same
methodology that I used when I looked at
overpriced homes when you're looking
at metadata it it gets the data gets
bad really quickly we we just did an
episode on the PO Mill Area well if you
do like a a half a mile radius around po
Mill you'll see homes and you'll get
into areas that are dramatically
different than pill proper and if you
get into some of these downtown closer
to Downtown Greenville neighborhoods as
well it starts to get really
dramatically different if you go on one
street there are $400,000 houses you go
on another Street there are houses
barely breaking $200,000
the only way to and and that's just the
way the market is that that you know the
more urban an area is the more it's
Street dependent versus area dependent
for home values so the way I kind of
mitigate that when I'm looking at
metadata is I I look at subdivisions
only because within subdivisions there
shouldn't be a great degree of
fluctuation and so I look at homes
that sold within subdivision then then
compare them on a meta level to other
homes that sold within those
subdivisions we picked subdivisions that
had at least four sales the past six
months so that we have a good sample
size I got rid of homes that sold for
over a million dollars because those are
anomalies it's not uncommon for homes
that are priced at that price point to
sell for you know 50,000 75,000
$100,000 less than what they're listed
for or or Poss even more in some rare
instances and I got rid of a couple of
downtown neighborhoods that are also
kind of anomalies like Markley place
the the downtown quote unquote
subdivision which is not a subdivision
but is listed as one in the MLS and
so I eliminated some of these because
again for a variety of reasons those are
anomalies and then I looked at the
houses that in the end after they sold
they sold for at at least $155,000 more
than what they listed for that would be
that was kind of where I defined the cut
off for okay this is an underpriced
home you know you could nitpick at
that homes all the time sell for up to
$5,000 more than what they're listed for
in this market and up to like
10,000 isn't super uncommon either
because you know you get into these
bidding wars often times a house will
end up selling for for $5 to $10,000
more than what it's listed for and
that's not necessarily indicative of it
being underpriced that's just that can
be just indicative of just how hot the
market is but once you start getting in
at least the Greenville area homes that
sell for $15,000 or more than what
they're listed for we need to start
assuming that that they were underpriced
that that's a home that was underprice
like I said I try to keep my range of
what a home is worth between you know
a range of up to $155,000 so I might say
this home is worth you know 250 I I
believe it'll be 250 to 265,000
something like that now if you know I I
do that and then it sells for 15 it
sells for
280,000 then I underpriced it right I
I would just have to own it at that
point that I underpriced it now in
my career that doesn't happen
that that would be a very unusual
situation because that has not been my
strategy I like to price things where
they are and I feel like that that is
the best strategy to price a home for
what it's worth that gets you when you
underprice a home there's a lot of
things that
happen but one of those things is that
you create a ton of more work for the
seller the seller has to be prepared for
a ton of showings if they're an owner
occupant have to be constantly leaving
the house as people cycle through it
makes the house really dirty then you
get a gazillion potentially a gazillion
offers most of them are going to be
garbage offers it's a lot of work it's
stressful and it's just it's not fun
if you can do the same thing by simply
pricing the home correctly still sell
the home but not have all that work and
you're still selling the home for as
much or more as you would have
underpricing it then I think that that's
the best
the best strategy so as I'm looking
at these homes that are
underpriced here is what the data
tells me now I I'm not a statistician so
I can't really determine margins of
Errors I know that there are ways to
determine a margin of error but here
is roughly speaking what the data
told me homes that were underpriced by
$15,000 or more they sold for $155,000
or more than what they were listed for
on average sold for about $3 a square
foot more than the competition more than
the houses comparable or at least within
the same subdivisions as them so $3
three $3 is not nothing but it's
also it's also kind of hard to say
you know that that's a little bit
different than when I looked at the
homes that were overpriced and there's a
12 dollar
difference and as well we looked at
that
75% of if I remember correctly of the
homes that were overpriced sold for
less than what the average was this is
not it's not the case here we we have it
as it's about $3 a square foot and and
we're at roughly roughly half the
homes sold for more roughly half the
homes sold for less than than what
you would have expected them to based
on the metadata for that subdivision
and then we also have to compare and and
again I did the same thing when we
looked at the overpriced houses we
also have to
compare what is the median we we want to
see does the median and the average or
the mean are they basically the same
because that's really important the
median looks at the numbers that are
right there in the middle versus just
taking the average and the reason why
that's important is you could have
anomalies on either side you could have
a home that you know homes that sold
just a couple of homes that skew all the
data in one direction or another the
median kind of helps us to to
determine whether that was the case or
not or or whether that's a possibility
and and so the median difference was
about well the two numbers are
1.25 so one and a quarter or
$145 greater for the homes that were
underpriced in terms of what they were
sold for versus the field so again
a125 a do and a half that's not to me
I would think that that's within the
margin of error I don't think that that
is statistically Rel
and so here is here are the conclusions
that I draw from this I think that right
now as it's a seller's
market the market is able to identify if
a home is is underpriced and the market
is going to correct for that I still
this was not enough data for me to
conclude that it's better to underprice
your home I've heard some people make
that
argument I've already made a little
bit of a case for for how it's a lot of
work for the seller it's not fun for the
sellers but I'm also not convinced
that it is actually the best way to
go with the with the average at it's
really
$3.33 was the exact average and then the
median between a125 and
$145 to me that just tells me that if
you underprice a home in this market the
market is going to correct for that and
you're going to end up selling it for
for pretty much what it's worth what
I do think is it's probably better what
what what this data does tell me is that
if you're going to underprice it it's
probably better to underprice it by a
lot than by a little if you
underprice your home you know by
$5,000 the market probably isn't going
to be as quick to jump on it and you're
not going to have quite as many offers
and and that person that's
willing to make that reach to to to pay
over you know 20 or or $30,000 more than
what it's listed for because you
haven't priced it so so aggressively
that you're getting all those eyes on it
so probably if you do want to go with
the underpricing strategy which in most
cases I don't think is a good strategy
but if you do then you probably want
to underprice it by quite a bit to get
as many people looking at it as
possible I think as well that we
need to be careful as I said before this
is a sellers Market I I can only imagine
that that number is going to go down I
can't really imagine that number going
up I can't imagine that as the market
cools off that underpricing a house is
going to be a you know an increasingly
better option I think that as we
as the market cools down a little bit
Remains the sell's market most likely at
least for the immediate future but cools
down from the insanity of the past six
months I think that we're going to see
that number level off a little bit
and again it's already really close to
zero it's already really close to
basically not being any different and
so I suspect that that will just get
reinforced as the market basically
returns back to the norm of what it has
been for for the years leading up to
2020 when Co made things go crazy
because of mortgage rates being so
low etc
etc
so my
conclusion when you're selling a house
you do not want to overprice it under
any circumstances the data is really
clear overpricing it does doesn't help
you it hurts you if you want to
underprice your home the data is not as
clear but if you do I think you want
to underprice it by quite a bit and and
as well this is supported in the data as
well that the that the homes that were
you know underpriced that sold for like
$115,000 you know closer to that
number by and large didn't do as well as
the homes that were overpriced even more
and so that's just something to
consider I'm not going to get too much
in the Weeds on that because again this
is metadata and metadata is only
useful if it gives you a very clear a
very obvious okay this is so much so
much different that we can't just excuse
this as a as within the margin of
error I think that in my opinion that
we're probably pretty close to the
margin of error on this and so I
think the simplest practice rather than
trying to figure out exactly how to you
know okay at what point are we
underpricing it the right way just don't
just price it correctly find a realtor
or use me someone that prices
homes for what they're worth you will
you don't need to worry about getting
traffic through your home if you don't
get traffic through your home then
you've overpriced it that's not
get having traffic through your home is
the norm right now you will get people
to look at your home the only way you
won't get people to look at your home is
if you overprice it you don't need to
underprice it to correct for something
that doesn't need to be corrected price
it correctly you'll find that you'll get
activity in your home homes are selling
on average for over 98% of what
they're listed for and that is
ultimately in my opinion the way to go
the data basically comes to the
same conclusion we're we're basically
within the margin of error here and
if it had been dramatically different
then I'd be like okay in this market we
need to perhaps adjust how we how we
list houses and what prices we do this
data that I'm looking at is not making
me feel that way I'm I'm feeling pretty
pretty confident that we need to
continue to use the best practices the
best practices are to determine what a
home is worth and to list it as such if
you accidentally underprice it in the
process the good news is that the
market right now seems to be correcting
for that and that's good for sellers
if you're a buyer you're dealing with a
lot of multiple offer situations and
that is just the way it is right now
pretty much every offer I submit for a
client is a multiple offers situation
and it's frustrating but that's just
the way it is at the end of the
day press your homes that you're selling
correctly and you won't have anything to
worry about that is the bottom line and
that is the conclusion for today's quick
episode if you have any questions for me
you can reach out to me with my
contact information in the show notes
please rate review subscribe download
all those things for our show and until
next time I hope you guys stay safe
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