If you’re selling your home, you must understand that pricing your home correctly from the beginning is critical.
The most common reason a home doesn’t sell is that it is overpriced. But how do you know if you have an overpriced house?
There will be signs that will be screaming for you to notice. Without considering them, you’ll put yourself in a terrible spot.
Overpricing a home can create damaging effects, period. The probability is that if you price your home too high, in the beginning, you will likely end up with less money in your pocket, which is not the goal when selling a home.
To sell for the most money, you mustn’t overprice it. It sounds counterintuitive that asking for more leads to less, but it’s true in many circumstances.
If you happen to make the mistake of overpricing your home, you must immediately identify this mistake and make a change immediately.
How does a seller know if their home is overpriced? There are many telltale signs to know if your pricing does not meet market expectations.
Keep reading, and you will find out how to know if a house is overpriced.
If you’re selling your home and have experienced any of the telltale signs below, make sure you adjust quickly!
Bill Gassett, a top Massachusetts Realtor with thirty-eight years experience and owner of Maximum Real Estate Exposure says there are very few things that will hurt the home selling process than overpricing.
Kyle from being in the industry for so long, you can immediately notice when homes don’t line up to the competition. Experienced Realtors immediately notice when properties aren’t comparable to other homes with similar prices.
Accurate house pricing influences real estate sales immensley.
Noteworthy Facts and Statistics on Overpriced Housing
1. An overpriced property is a home listed significantly higher than its market value.
2. Overpricing can occur due to various factors such as location, demand, and speculative market conditions.
3. Overpriced houses often experience difficulty in finding buyers and may stay on the market for extended periods.
4. Buyers should exercise caution when considering an overpriced house as it may not provide a good return on investment.
5. Working with a knowledgeable real estate agent can help buyers identify and avoid overpriced houses.
6. In the last year, there has been a 12% increase in overpriced properties.
7. Studies show that 9 out of 10 homebuyers believe they have encountered an overpriced house at least once during their search.
8. On average, overpriced homes stay on the market for 23% longer than homes priced appropriately.
9. Overpricing a house by just 5% can decrease the chances of selling it by 42%.
10. One of the top mistakes by home sellers is putting their house in a price range that doesn’t make sense.
Ten Ways to Tell If Your Home is Overpriced
Let’s examine how to tell if a house is overpriced.
Your Home Is Priced Much Higher Than Your Neighbors
Generally speaking, home values will be relatively consistent and close in most neighborhoods. One telltale sign that your home is overpriced is if your home is listed at $100,000 higher than similar homes for sale in your community.
While it’s not impossible that there can be homes with a $100,000 value difference, it is pretty rare. One of the most common methods that real estate agents will use to determine a home’s value is by completing a comparative market analysis.
A comparative market analysis, also known as a CMA, is best described as a detailed analysis of sold homes in the past 6-month time period in a given neighborhood.
If your home is priced much higher than your neighbors, your real estate agent may not have completed a detailed value analysis. If a CMA isn’t completed, this will not only lead to your home being overpriced but can create issues with bank appraisals.
You need to be in an expected price range for your home to sell.
You’ve Had Very Few Or No Showings
Excitement is a widespread emotion that a seller experiences. Sellers are generally happy their home is listed for sale and being advertised all over the Internet. Weeks pass, and there have been a couple or, even worse, zero showings.
That excitement now turns to concern and frustration. If this sounds familiar, the likelihood that your home is overpriced is high.
If your property has been listed for sale for a few weeks and you’ve had only a few showings, you need to adjust the price to generate some activity and showings.
When little activity occurs, it’s a sign something is wrong, and it’s usually an aggressive asking price. When an asking price is unreasonably inflated, most buyers can see it. They can see the price is exorbitant because they are out looking at other properties.
The Days on Market is Much Higher Than The Local Average
When homes are priced incorrectly, they sit on the market without any offers. The days on the market continue to grow. It is a terrible situation that continues to get worse over time.
Going above the average selling time for the local area should tell you something loud and clear. The market tells you when to reduce your price. It’s at this time you must listen to the market.
From being in the industry for many years, when the time on the market grows so does the spread between the listing and eventual sale price.
One of the first things a buyer will ask their agent is how long the property has been listed for sale. Properties with long market times are not in a position of strength.
Unfortunately, there are many myths about house pricing that too many sellers believe. Buyers don’t want to be overcharged because a home seller has unreasonable expectations.
There Have Been No Offers Submitted
In most real estate markets, a homeowner should receive at least one offer within the first two to three weeks if a home is priced correctly. If you haven’t received an offer after a couple of months, this is a great way to know your home is most likely overpriced.
If your local real estate market is currently in the midst of a seller’s market, you should expect an offer on your home within the first couple of days on the market if it’s priced correctly.
Even in buyer’s markets, homes that are priced accurately receive interest. Some types of properties will take longer to receive an offer. For example, there may be fewer buyers when selling a luxury home.
You Hired The Agent Who Recommended A Much Higher Price
There can be hundreds to thousands of real estate agents in any real estate market.
When interviewing prospective Realtors to sell your home, you must know what questions you should ask during an interview.
One of the most critical questions relates to the pricing. You must understand how the prospective real estate agent created your home’s listing price.
If you interview three real estate agents, one of them suggests a price of $30,000 higher than the others, it’s vital to know how they came up with that number.
Many real estate agents will “buy a listing” by suggesting an asking price much higher than the market value.
If you made a mistake and hired the real estate agent who suggested a much higher listing price, your home is likely positioned incorrectly in the market.
Neighbors Homes Are Selling & Yours Is Not
One of the most frustrating things for a seller is when the neighboring homes are selling and theirs is not. When this happens, it is a sign that your home is priced too high.
It’s not uncommon to hear homeowners saying, “My neighbor’s home just sold for $500,000, and mine is much nicer than theirs. Why isn’t my home selling?”
Many sellers fail to understand that many things can influence a home’s sale. If this sounds familiar, a couple of things to keep in mind when it comes to comparing your home to your neighbors include;
- Was your neighbor’s home a different style of residence? Example: ranch vs. two-story colonial
- Was your neighbor’s home larger?
- Did your neighbor’s home have high-end upgrades and amenities? For example, granite counters, building additions, etc.
- Is the location of your home inferior or superior to your neighbors? For example, corner lots or private/wooded lots.
- Were the mechanics of your neighbor’s home newer than yours? For example, a new roof, windows, furnace, etc.
The bottom line is if other homes are selling in your neighborhood and yours is not, it’s probably overpriced. When something is too expensive, buyers are unwilling to pay the premium.
The Open Houses Are DUDS
One decision that homeowners should make is whether or not they want open houses. Statistically, less than 2% of homes sell directly from an open house.
Open houses allow potential buyers to look at homes without feeling the high pressure that some real estate agents may place on them.
If you believe that open houses are necessary to sell your home, what does it mean when the open houses are DUDS? Your price could be an issue if your real estate agent markets the open house with no activity.
If nobody walks through the door during the 2-hour open house, it screams that there is a problem.
Like most, buyers have busy schedules, but buyers will take the time to visit open houses if they are interested in a home. A buyer will, however, not waste their time if they feel a home is overpriced.
Internet Traffic Is Very Low
The Internet has changed the real estate industry over the past 10-15 years. The majority of home buyers are beginning their home search online.
They will visit the most popular real estate websites for buyers and look at listings.
When buyers are interested in a home they see online, they will contact either the listing agent or their real estate agent to schedule a private viewing.
One way to know your home is overpriced is to have little to no internet traffic or property inquiries. An experienced real estate professional with a strong understanding of how to market homes for sale online should be able to provide traffic statistics and property inquiries.
Overvalued housing is too pricey, and buyers recognize it even online.
Showing Feedback Indicates Improper Pricing
One of the most significant benefits of hiring a top real estate agent is receiving feedback from showings.
Feedback from other real estate agents and buyers viewing a property can significantly help.
If you’re not receiving feedback from showings, it may be time to think about firing your real estate agent.
Feedback is essential because it allows a homeowner to correct things a buyer may object to. For example, if a prospective buyer indicates the paint colors are too “bright,” it may be time to consider repainting the room.
If the feedback from showings is that a home is overpriced, a seller can adjust the price.
You’ve Received Lowball Offers
Most overpriced homes will not receive any offers; however, it is possible. Homeowners who overprice their homes and still receive several offers should feel somewhat fortunate.
It’s a good chance that if a home is overpriced, the offers received are “lowball” offers. If a house is overpriced and offers are much less than the listing price, is it fair to consider them “lowball” offers?
If you’re selling your home and have received several offers that you would consider “lowball” offers, you may need to reconsider whether your price is appropriate.
Your Agent is Burying a St. Joseph Statue
When your agent asks if it would be OK to bury a St. Joseph statue, you should start to worry. Burying St. Joseph is a superstitious practice done by sellers and agents when their home isn’t selling.
Some consider it a myth, while others swear by its success. St. Joseph won’t sell an overpriced house any more than the best real estate agent in town.
Your Home Didn’t Sell & Expired
Possibly, the most obvious way to know a home is priced wrong occurs when it doesn’t sell and expires. If a home doesn’t sell and becomes an expired listing after six months, it’s not because there are not ready, willing, and able buyers in your local market.
Instead of blaming the lack of buyers or the local real estate market, a seller must look in the mirror and realize their home was overpriced.
Every home has a price tag that is acceptable to home buyers. If a home’s listing price is relatively close to the number a buyer considers fair, it will sell and not expire.
The Importance Of Pricing In Real Estate
The number one reason a home sells is that the price is right! Determining a home’s list price is critical to the home-selling “puzzle.”
When you have the correct list price, it will sell relatively quickly. If you choose to overprice your home, it will either not sell or take several months.
If you decide to overprice your home, remember that you will likely receive less money than if you initially priced it correctly!
Conclusion
An overpriced house isn’t challenging to spot. When a home is too expensive, buyers know it. It usually stands out like a sore thumb. Remember this when you want the most money possible in the shortest time.
About the Author: The above Real Estate information on ten ways to know your home is overpriced was provided by Kyle Hiscock, a top Realtor covering national-level topics for The Rochester Real Estate Blog. If you are considering buying or selling a home in the Rochester area, call Kyle!
Another great article. In most markets today if it’s not under contract within the first 4-6 weeks of comig on the market; it’s likely overpriced. Sellers need to focus on the market data; just as buyers do. There are times (and markets) where it even pays to strategically underprice a little to generate multiple offers. This is particuarly true if doing so gets you to an Internet Search price break point.
I have never seen a seller get more money for their property by over-pricing their home. I have been licensed since 1988.
Does any one consider the tax assessment as one more factor, along with comparables, in determing the market price of a house?, I do, and I find it to corroborate pretty accurately the “sold” prices of similar houses with similar square footage. I usually look at the market prices first and then I take a look at the tax assessment,
if I see that it corresponds with my conclussions after reviewing comps, it gives me another layer of certainty.
Fantastic Article and it is relevant to today’s Sellers.
Thank you for posting.
This is like the banking industry asking an active bank robber to give them advise on security for the banks and then following that advise. RE agents want to price your house low enough so it sells immediately, they collect their commissions quickly and move on to the next “client”. It is a game that is rigged in the agents favor.
RE agents live and die by the comp prices, yet the vast majority of the comps for the last six month period have absolutely no relation or comparison to your house.
Our agent ran the comps in early April and came up with $336,000 as our price. The house next door, less curb appeal, but close to as nice as ours and the same size, sold last July for $363,000, but it wasn’t used as a comp because it was just over six months ago. And in the last six months, the action in our area has become more intense.
Who loses if they sell my house too cheap??? If I sell at $336,000, but I could have gotten $363,000, I lose $27,000, but the agents 3% commission goes from $10,800 for the higher price to $10,000 for the lower price. They only lose $800, while I lose $27,000, so they have great incentive to price the house low and sell it fast. It is a game that is rigged in the agents favor.
Dave you clearly haven’t had a good experience with real estate agents. Most real estate agents, however, do the exact opposite of what you’re saying. The average real estate agent will tell a seller what they want to hear in order to get a listing. If they know the seller is interviewing multiple agents human nature is for the seller to want to believe their home is worth more. Many sellers make horrible choices picking real estate agents because their decision is based on price not skill.
It sounds to me like you have made the classic mistake of talking to one real estate agent who doesn’t have good pricing skills. It is always critical to interview multiple agents. The advice by the way in the article is spot on. Your home is priced too high when it’s not selling!
Setting the price right is imperative. The process that most agents take is wrong. A seller needs to see their home first through the eyes of a buyer. What Mr. Seller believes is the best of the best, does not always resonate that way with Mr. Buyer.
The Law of Substitution is always at play as well as obsolescence. Then there is all that technology that many many many agents don’t fully grasp. Over this past weekend, I provided a potential buyer with pure data for how to come in with an offer. The home maybe tasteful, but $55,000 over priced.
I have no problem walking away from sellers who wants to list their homes over priced. Sorry, but no marketing in the world is going to bring forward a buyer to over pay. I also don’t need to see my name on that sign just hanging out in the yard.
Fun article Bill! I love the dynamics of all the contracts involved during the sale-buy process. I especially enjoy reading the wittier comments here.
Why not simply add a percentage (say 20%) to the fair market value per the property appraiser as the selling price?
Kevin adding 20 percent to the market value would make the home overpriced.