Wow, that house is priced way to high! That is a familiar quote I hear from buyers often. The end result? They move on to homes priced accordingly and realistically. As for the overpriced home, it sets on the market and goes through price decreases until someone finally makes an offer which can be lower than what the seller could have received if priced accordingly in the first place.
All sellers want to make the most money they can off the sale of their home; who doesn’t? Pricing high and hoping for a windfall isn’t the best practice to use and could actually be hurting the seller’s bottom line in the long run.
When I estimate the price for your home I will give you detailed reports and a pricing range using three different pricing tools. This allows you to list your home for the price that makes since and attracts the most interest. Ultimately it is the seller who prices the home. If you use an agent that says this WILL be the list price I would kindly show that agent to the door. Also beware of agents that agree to any price you want to set it at. These “professionals” simply want to see their sign in your yard to garner more business for themselves. Once your house isn’t getting noticed they will start the price decrease conversations.
Here are some major pitfalls with over pricing your home.
1. You lose out on potential buyers – Let’s say the research shows a good listing price at $350K. You ignore my three pricing tools and recommendation and list it at $370K. When buyers are looking for homes most real estate professionals will set them up with search perimeters topping out at 25K increments (ie $275K, $300K, $350K, etc…). Those buyers who are topped out at a search range of $350K will not see your house in their search. Those that see it at the $375K limit will see it overpriced and move on. After your home doesn’t sell and you go through the price reduction process down to $350K you have now exposed your home to the market for a lengthy period and buyers will now wonder what is wrong with your home. Expect offers to come in below the $350K price mark now.
2. Appraisal Issues – Pricing your home at the high end or above market value can lead to appraisal issues. If the home doesn’t appraise for your higher price than the buyers will not be able to get a loan for that amount.
3. The best days on the market are wasted – Pricing high and having little traffic during the first couple weeks of your active listing wastes those precious days when your home will receive the most activity and showings. From day 1 to around day 20 the seller is definitely in control of the process. The longer the home is on the market the less control the seller has and the buyers will be looking to score a deal with a home that isn’t selling.
4. Credibility is Lost – Buyers today are more informed and educated than any other time in history. Buyers know the market and can easily tell if a home is overpriced. If they fell that way they will swiftly remove your home from contention.
5. You Help Your Neighbors Home Sale – Other home owners in your neighborhood will be happy to see your ridiculously high priced home. They will be smart and listen to the experienced agent and list their home appropriately. Buyers who like your neighborhood will pass on your home and pursue the attractive listings in your area.