The Dangers of Overpricing a HomeThe reason why you should not overprice a home is simple. It won’t sell! In addition to not selling when you overprice your property the odds are stacked against you that it will sell for what it should if priced properly from day one.
The process of selling a home can be an emotional roller coaster, one that many people are not adequately prepared for. What your home means to you, and what you imagine it to be, must come to terms with the real world of the current real estate market.
Nowhere does this clash become more apparent than in pricing your home.
You are putting your home on the market to sell it. This may seem like a given, but you would be surprised how many people miss this important fact when they begin working on listing their home.
Everything you do in the listing and selling process is meant to accomplish this goal. It may be one of your most prized possessions, but the price the market will bear is the most important factor in the sale of your home.
Buyers don’t care that you need X amount of dollars from your home because you are buying something elsewhere. All a buyer cares about is paying the fair market value.
Overpricing a home is at the top of the list for reasons why a home does not sell.
You are free to list your home for any price you choose. However, any exceptional real estate agent will tell you that overpricing a home can lead to serious problems. Some of these include:
ATTRACTING UNSCRUPULOUS REAL ESTATE AGENTS
One of the top mistakes home sellers make when choosing a Real Estate agent is picking one based on the suggested list price they give you for your property. Don’t be suckered into the oldest trick in the book! Overpricing homes are part of a lousy agents game plan. There are lot of great real estate agents who don’t have overpricing a home as part of their game plan. It is your job to find one!
The problems of trying to sell a house priced too high are numerous, and many agents will want to avoid getting into a listing that is doomed to fail. Good agents will tell you honestly that you want more for your home than you can reasonably expect.
SCARING OFF BUYERS
If you are not careful, you can scare off the best buyers before you ever get a chance to show them your home. Buyers are often working with real estate agents, and a good agent can spot an overpriced home from a mile away. These agents will tell their clients to steer clear of your home.
Even if buyers are not using an agent, they will often still avoid a home that seems far pricier than others in the surrounding area. People want a deal, and positioning your home at a premium will drive off anyone that falls into this category.
Listen carefully to what the market will bear. Look at the comparable real estate sales data through the eyes of a buyer not as an emotional seller.
One of the things that is common with home sellers who overprice their homes is the belief that every home improvement they have made over the years translates into a one for one increase in value. Unfortunately that is not how things work in real estate valuation. There are some things that cost money that have very little return when selling a home as they are simply considered part of upkeeping a home to current standards.
TAKING TOO MUCH TIME TO SELL
Overpricing a home causes the days on market to become bloated. There is an ideal time frame to sell a home in. Take much longer, and you risk having your listing expire – a stain that is hard to erase from a property.
You also risk the market changing on you, and not in your favor. If you price your home competitively in the first place, you are likely to sell it within a month – taking advantage of whatever the current market happens to be.
One of the things that Realtors often hear from home sellers is “I can wait for a great offer.” “I am no rush.” “I have plenty of time to sell and can wait for my price.” “I can always reduce my price later.” What many sellers fail to understand is that in Real Estate time is your enemy!
The number one question that every buyer asks their agent when becoming serious about a property is “how long has this home been on the market?”
When you first list your home for sale as a seller you are in the drivers seat. A buyer is not. They know they need to be realistic if they want to purchase the home.
At a certain point in time, depending on the market, the pendulum will swing the other way and the buyer will feel like they have the upper hand. This is because the days on the market heavily influences what a buyer will be willing to offer.
When the days on market become higher than the norm buyers will start to ask themselves what is wrong with this home? Why has someone else not made an offer?
Buyers will feel like they can negotiate with someone who’s home has been on the market for months far more than someone who just listed. This is just human nature and a very common thought process.
Contrary to what many home sellers think, overpricing a home does not lead to a higher sale price. It is the exact opposite.
FAILING TO SHOW UP IN BUYER'S SEARCH RESULTS
Real estate agents and buyers search for homes nowadays in the same way everyone else does – online. The websites often offer price RANGES to search in. Those ranges are typically in $50,000 increments.
If you set your home price at $420,000, everyone searching for homes up to $400,000 will fail to see your home in their search results. For example lets say you have met with a Realtor and they have pinned the market value of your home somewhere between $385,000 – $390,000.
The agent recommends that the proper list price is $400,000 figuring there may be a little bit of negotiation involved. The agent realizes that pricing over the $400k price barrier could price your home out of the market.
Instead you decide you want your home priced at $420,000 because you are under the belief that a higher list price leads to a higher sale price. You may imagine pulling in buyers willing to haggle with you, but the reality is that many buyers will miss your property altogether because they are only searching up to $400,000.
Pricing within the range of comparable sales data, on the other hand, will make certain that your home is seen by everyone looking for a place to buy in your neighborhood.
STAY REALISTIC ON HOME PRICING
Seek out a good real estate agent, and listen to his or her advice for pricing your home. Many will advise you that it is better to list a little lower, and encourage a bidding war, than risk all of the problems that listing too high brings. Stay realistic in your pricing, and accomplish your ultimate goal of selling your home. Overpricing a home creates one certainty – stress for all who are involved.
If you take away anything from reading this remember this one thing: 75% of Real Estate marketing is the price that is set for your home.
All of the marketing and advertising in the world will not sell an overpriced home. If you don’t price your home correctly all of the rest of the marketing will be pointless.