Realty Check: Even Winners Overestimate Home Values
Jean Feingold hoped that her vintage bungalow in Gainesville, FL, would be worth about $140,000, considering that her whole neighborhood was undergoing gentrification, with new homes sprouting and old ones being fixed up.
But local appraiser Joe Foy was not swayed. The lack of air conditioning would undermine the appeal of the bungalow to almost any buyer, he thought. And, though the house is in good condition, it’s small, with only a single bathroom and a modest kitchen. He appraised the bungalow for $115,000.
Feingold’s rationale was good enough to make her a winner in ForSaleByOwner.com’s “Is Your House Priced Right?” contest…but it didn’t hold up to the professional evaluation. Homeowners frequently overestimate the value of their houses compared to those of their neighbors’.
This week, The Baltimore Sun reported on precisely this point. (Like ForSaleByOwner.com, the Sun is owned by Tribune Co.) Mortgage database firm FNC ran the numbers and found that sellers are almost hopelessly out of touch with reality:
As the housing market worsened, so did the gap between what sellers were asking and what they got. Nationwide, the typical asking price was about 8 percent higher than the typical sale price in 2007, 13 percent higher in 2008 and a whopping 24 percent higher in 2009, FNC says. The gap narrowed last year — with asking prices 13 percent higher than sales prices — but are on the rise again, averaging 17 percent in the first seven months of this year, the company said.
That is why ForSaleByOwner.com encourages home sellers to always get a professional appraisal and then to price their home for sale accordingly.
Meanwhile, Feingold took her prize check straight to the store and upgraded her kitchen with a new stove and a new refrigerator. Air conditioning? Not on her priority list – not yet.
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