The Dangers of Overpricing a Home
The 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 appropriately priced from day one!
Selling a home can be an emotional roller coaster for which many people are not adequately prepared.
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 with proper house pricing.
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 essential fact when they begin working on listing their homes.
Everything you do in the listing and selling process accomplishes this goal. It may be one of your most prized possessions, but the price the market will bear is the most crucial factor in selling your home.
Trying to price your home too high – because you paid a certain amount for it or because it means so much to you – is a sure way to stall the successful sale of your property.
Avoid The #1 Home Selling Mistake
Overpricing a home is one of the most common home-selling mistakes among homeowners.
Buyers don’t care that you need X dollars from your home because you buy something elsewhere. All a buyer cares about is paying the fair market value. Nothing will blow up in your face quicker than an overpriced property.
Overpricing a home is right at the top of the list of reasons 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 house can lead to severe problems.
Some of these include:
Attracting Unscrupulous Real Estate Agents
The initial asking price of your home may lead unscrupulous real estate agents to your door, people you may not realize are bad news until too late.
Real estate agents are in the business of selling houses, and they want to work with clients who hold realistic expectations.
The problems of selling a house priced too high are numerous, and many agents will want to avoid getting into a listing doomed to fail.
Good agents will tell you honestly that you want more for your home than you can reasonably expect. However, there are also agents out there who will tell you precisely what you want to hear.
Overpricing a home is part of their game plan. They will encourage your high expectations to get your listing, only to tell you later – after the ideal time frame for selling is past – that your price must go down to sell.
You might be thinking, why would a Real Estate agent want to take a listing they have no chance of selling?
Why Do Some Real Estate Agents Intentionally Overprice Homes?
A Realtor who purposely tells a seller their home is worth more than the actual market value does so for several reasons.
- The first is using your home as an advertising vehicle to pick up buyer clients.
- The second strategy is to get you to sign a listing contract with them because they can’t beat out a good Real Estate agent otherwise.
Some Realtors could care less about selling your home because they want to have their sign in your yard for the next 3-6 months. They want to be able to advertise your home online, all the while picking up buyer clients that they can “spin” elsewhere because God knows these prospects won’t grossly overpay for yours.
After getting plenty of buyer clients in the passing months, some agents will finally get around to telling you, “boy, am I sorry the price I gave you for your home doesn’t seem to be working out.” It would be best to drop your price by $25k, Mr. & Mrs. Seller. Sorry, the joke is on you!
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 is part of a lousy agent’s game plan. There are a lot of great real estate agents who don’t have to overprice a property as part of their game plan. It is your job to find one!
Overpricing a House Scares Off Buyers
If you are not careful, you can scare off the best buyers before showing them your home. An excellent buyer’s agent can spot an overpriced home from a mile away.
These agents will tell their clients to steer clear of overpriced houses.
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 common thing 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. Some things cost money and have very little return when selling a home.
For example, here are 20 home improvements that don’t add value to a house.
Take Too Much Time To Sell
Overpricing a home causes the days on the market to become bloated! Some sellers are more motivated to sell more quickly than others.
Not all know how much time matters in selling a property, though.
There is an ideal time frame to sell a home, and it usually falls within the first few months that the house is on the market.
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 is.
However, the market could go south on you if you take too long. Your home started too high, so when the market turns sour, you will have to drop far lower than you would have initially to move the property.
One of the things that Realtors often hear from home sellers is, “I can wait for a great offer.” “I am in no rush.” “There is plenty of time to sell, and can wait for my price.” “I can always reduce my price later.” Many sellers fail to understand that Real Estate time is your enemy!
These statements from sellers are all home pricing myths.
Days on The Market Matter!
The first question every buyer asks their agent when becoming serious about a property is, “how long has this home been on the market?”
You are in the driver’s seat when you first list your home for sale as a seller. 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 influence what a buyer will be willing to offer.
When the days on the market rise above the norm, buyers will 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 whose home has been on the market for months far more than someone who just listed. This is just human nature and a prevalent 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 Search Results
Real estate agents and buyers search for homes nowadays like everyone else does – through search engines and popular home-buying websites.
They may be specifically designed for real estate, but they still function the same way as every other search engine. You enter the desired parameters, and the search delivers results that fall into those specifications.
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, let’s 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 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 believe 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 for up to $400,000.
However, pricing within the range of comparable sales data found in a comparative market analysis will ensure that your home is seen by everyone looking for a property in your neighborhood.
Home Pricing Appraisal Issues
Say you are lucky enough to pull in a buyer willing to pay what you are asking. They think your place is perfect and are willing to pay your asking price for the home. There is only one problem: They need to get money from the bank to pay for it.
All banks demand an appraisal of any property they loan money for, and yours will be no exception.
Your local appraiser does not care how perfect you think your home is, nor how perfect a fit it is for this particular buyer. The market rules the appraiser, who will appraise your property accordingly.
When the appraiser returns with a market value noticeably lower than the contract price, the bank will likely balk at giving the buyer a mortgage unless they have a substantial down payment.
This can take you from a sure sale to a botched mortgage application, leaving you looking for further buyers. Appraisal gaps become much more common when pricing is not realistic from the start.
Stay Realistic on Home Pricing
Seek an excellent real estate agent, and listen to their advice for pricing your home. Many will advise that listing a little lower and encouraging a bidding war is better than risking all the problems that listing too high brings.
Stay realistic in your pricing, and accomplish your ultimate home sale goal.
Over the years, I have seen and heard it all from some home sellers who set unrealistic expectations regarding the value of their property. They will forget about the real estate agent’s evaluation and devise every excuse under the sun why their home is not selling.
In three decades of selling property, I have heard some of the craziest requests from sellers when their property fails to sell.
Instead of being objective about their home is overpriced, the finger will get pointed at the Realtor. Here is a humorous look at what happens with realty pricing issues. While this is a comical look inside the world of Real Estate pricing and may seem a little far-fetched, believe it or not, some of these things are spot on!
Overpricing a home creates one certainty – stress for all who are involved. When you make a pricing mistake, it is essential to address it quickly.
Knowing when to lower your price will become an essential step in getting it sold.
Final Thoughts on Overpricing a Home
If you take away anything from reading this, remember this: 75% of Real Estate marketing is the price 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, the rest of the marketing will be pointless.
About the author: Bill Gassett, a nationally recognized leader in his field, provided the above Real Estate information on the damaging effects of overpricing a home. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 37+ Years.
Are you thinking of selling your home? I am passionate about Real Estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southboro, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
