Is it really necessary for you to sell right now? If you can hang on for a year or two, that would be what I would do if I were you. Our market here has too much inventory which is driving the prices down. Plus, there are many foreclosures in that inventory, which is making the situation worse for homeowners like you who have to compete with them.
I would suggest you contact a Realtor and have them do a market analysis for you. In that way, you'll have all the information and can make an informed decision.
Best of luck to you. If I can be of help, please don't hesitate to call.
Coldwell Banker Residential Real Estate
Zillow is very convenient tool. However at the end of the day the Price you decide to market your home at is determined by what has been selling in your area. A Realtor can help you determine that number. Do shortsales and Foreclosures have an impact on your property? Indeed. That is what we are competing against. Bank Owned Properties are priced to move fast so if you have any in your area this will have an impact.
Contact a Realtor and have this discussion.
As for the one sale that was extremely low, the only way an appraiser would include that sale in the analysis, is if there are not 3 other comparable sales within the last 3 months, within a 2 mile radius. But if even if the appraiser does have to use the lowest sale, it will be averaged with 2 others.
The best way for you to find out the true market value is to have a real estate professional in your area, use sales data from the MLS (not the public real estate sites that pull only some of the data from the MLS). Your agent should look at comparable homes, in comparable neighborhoods (if yours is smaller than 2 miles in diameter) within a 2 mile radius, that are currently on the market, as well as the sales. I say this because that is most likely the way the appraiser will assign the value that can make or break your eventual sale.
Also, look at the big picture, through the eyes of a buyer. Unless you live in an exclusive neighborhood with the likelihood that plenty of buyers are only looking in your neighborhood, you have to consider the fact that a buyer is probably looking at a large area, in a specific price range, at homes with the specifications of that buyer. So when determining price, consider how you would make your buying decision, from the perspective of the overall market, and what's available in your price range. If the buyer can find homes that are newer, bigger, in a nicer neighborhood, in a better school zone, have upgrades that your home does not, etc., in the same price range, there's a high probability that the buyers will not even look at your home. They'll just look at the most they can get for their money. So do your best to avoid that pitfall.
And after all that, once you've found a buyer, your buyer's lender will have the final say on whether or not they'll accept the appraised value! Recently, some banks have decided that the market is not finished correcting itself, and have taken it upon themselves to lower the value the appraiser has determined! It's an incredibly tough market right now.
BUT, there are still ways to overcome many of these obstacles. You need a real estate agent who is going to take a professional, full video tour (not virtual tour) and upload it to many web sites, that rank high in the major search engines. Your agent should also take plenty of professional looking photos with good lighting, and no clutter showing. Your agent should then place your home on their blogs, in addition to their own web site, their brokerage web site, and make sure it goes into internet syndication. If you want open houses, be sure to communicate that to your agent before signing a listing agreement. And let your agent know how often you want to be contacted. Every seller, and every agent is different and has different expectations. The best way to get your home sold is to have an agent that you're comfortable enough with, to leave your listing with that particular agent, for as long as it takes. Switching agents is a good idea, if the agent is not doing their job. But switching just because your home hasn't sold, even after all the right steps have been taken to bring about a sale, will only break the momentum that happens once the process is moving. Lastly, ask your agent what the average time on the market is right now. In the Daytona Beach area, we have 2 years of residential inventory! That's why I say if your agent is doing their job, try not to break the momentum by switching agents... unless you're sure you know another agent that is up to date with Web 2.0, video tours, and is in agreement with your expectations. =)
If it isat all possible you should get an independent appraisal of your property right now. Then you will have a better idea of what your true value is. However, if there is another identical home that is priced at $198K then it would be very difficult for you to justify the value of $350K on your property. Unfortunatly the market is really what will determine your homes value. But
Good luck to you!