Overpricing might seem like a good idea to you because you think that you can strike a bargain, right?
Wrong. Most often, homes that are over-priced are more difficult to sell and in many cases when the price is not reduced, it may never sell.
Why? Because buyers almost never make offers on them, especially if there are similar homes around with better prices.
Unjustified high home price is very likely the exact thing that turns potential buyers away from your property!
And that’s not the reaction we’re looking for, now is it?
Pricing a home is an art and, within reason, a science….and each home’s value falls within a range.
Don’t make nearby homes be a better deal than yours by asking for an inflated price.
An over-priced home makes other homes nearby easier to sell since they’ll look like a better deal. If you can get the same floor plan, same square feet, but save many thousands of dollars…..wouldn’t you prefer to purchase that properly-priced home instead of the over-price one?
How over-pricing can cost you a loss of money and increased difficulty selling:
#1 — The price battle between agent and seller
Many sellers overprice their homes because they tend to have a very limited perspective on the property market. After all, aren’t they just concerned about one home and that’s their own? Right?
Agents, especially full-time professional agents, on the other hand, live and breathe property markets on a daily basis, so they have a better understanding (read: objective) of current market conditions.
Sellers often believe that agents just want to price their home at the lowest level possible so that they can make fast money!
And, surprise, surprise, that’s exactly where the friction begins!
But in truth agents know how to price homes in the correct way so that your asset is sold as an asset in the end. It’s a product that needs to be sold at a price can be validated.
#2 — First impressions do make a difference
It’s always about ‘the market’.
The market will provide the most feedback to a new listing in the first few weeks of marketing, so both agent and seller need to do everything right from the start!
Here is your pricing cheat sheet: Choose ONE action:
- Price it correctly… and you shouldn’t have to worry about getting enough feet traffic through the door! Especially if you followed your real estate agent’s advice when it comes to cleaning, repairing and de-cluttering your home prior to its marketing!
- Price the property above its market value… and the slow or non-activity will speak volumes as well. It will lose momentum as other, newer & more market-related property listings pop up and push your property off the potential buyers’ radars!
#3 — Risk of a changing market
Naturally, property markets are continuously in motion as new information arises: perhaps it’s that new highway they’re going to build, an exciting renovation of the local mall, or the arrival of a new community or new school.
Maybe there’s the economic or political outlook which might be deteriorating which may introduce uncertainty in the property market and result in home buyers dragging their feet. Maybe interest rates start to rise?
A property might hit the market during a more optimistic time, yet the chances of getting a top price are now at risk when inventory is piling up and properties aren’t selling as quickly anymore! So over time as the inventory of homes for sale increases, an over-priced home sit and sits while homes around it sell and sell. So, how does that seller feel about their over-priced home now?
#4 — And then there’s the price reduction
After a certain period of relative inactivity, a price reduction is likely the next strategy.
If the seller doesn’t price the home within striking distance of what the buyer perceives as value, the seller will have to come down in price!
Sometimes the price drop is not enough and buyers won’t take them seriously.
As an over-priced home goes the forced price-reduction, eventually it hit the right spot where is should have been from “day 1”, but buyers might want to punish the sellers and offer an even lower price than they would have if the home entered the market at the right price.
Unfortunately for the seller, but they will be at a disadvantage when the time comes to negotiate price. Dropping a price can be viewed by buyers as a sign of weakness and a drop in price hints to buyers the seller may be able to take even less for their home this time.
#5 — Always a risk of showing poorly
As time passes, owners might get lazy around their houses and don’t realize that weeds are growing back, grass is drying or over-growing, dust accumulates, etc. The house won’t show as well as it did when it went on the market when it was fully prepared and ready on ‘day 1’.
Buyers who do show up when the price is right at a later date will then have even more reason to penalize sellers with their (lower) offers.
Closing advice to sellers
If you are serious about trying to sell your home in time-frame you want, at a fair price, then your pricing should be right the first time around, using recent comparable sales in your immediate area from the last 6 months, factor in any particular advantages about the property that you can justify with proof, and talk it over with your real estate agent!
However, for whatever reason, the initial marketing price is higher than what the real estate agent suggests, have a Plan B in place to reduce the price quickly and use the reduction as a marketing plan! But do not wait too long to lower the price. The market waits for no one and there is no way to predict what will happen far from now. We can only work with recent and current data to help sellers and buyer come together and make both sides happy with a home that is priced right.
When the price is compelling the home should be selling!