You are ready to put your house on the market. All systems are go: you hired a real estate agent with an excellent marketing plan directed to your target audience, the house is spotless, the necessary repairs made and the curb appeal couldn’t be more attractive. However, there is one problem that could derail all of your hard work. You have priced the house too high. What you may not know is that pricing too high could cost you more money in the long run – a very expensive mistake.
Unfortunately, this is a problem that we see quite often. Finding the right price for your home takes some work. There really is no specific math that comes up with the exact price your home is worth, nor is there any magic tricks an agent and his client performs. It’s the market that determines the value of your home and as we all know, the market has fluctuated big time in the past several years.
First, let’s take a look at the sellers who insist on listing a home for more than it’s worth. We understand why a seller wants to get the most dollars out of their home as they can. When they purchased their home, it was a huge investment. There isn’t a homeowner around that doesn’t want to get back every last dime they have put into their property. But the problem is, many home sellers today are unrealistically optimistic. Who are these sellers?
They bought their home at the height of the market and cannot afford to sell for less.
They bought at the peak and can’t stomach the fact that they will lose some sizeable money.
Buyers have an emotional attachment to the home. “I love my house! And so will everyone else!” (Ask a home appraiser if this is true!)
So what are the dangers of pricing a home too high? Many sellers tend to think, “So what if I have to lower the price in a few weeks! What’s the big deal? I won’t know if I don’t try!” Let’s look at why it’s important to find the right sales price from the very beginning:
First Weeks Are Critical: This cannot be repeated enough. The first 2 to 3 weeks a home is on the market are the busiest time in which buyers will view a home. Interest is high and traffic should be consistent.
Online Is Key: Again, 90 percent of buyers look online to begin their home search. If a buyer wants to buy a home in a certain price range, say $200,000 – $250,000, and your house should be in that price range, but instead, it’s listed at $260,000, then your target buyers won’t see your property.
Negative Reputation: Homes that are still on the market after a few months can often get a negative reputation because real estate agents tell their clients that the home is overpriced.
You Make Your Neighbor’s Home Look Good: If you have other homes in the neighborhood that are for sale, and they are appropriately priced, buyers will flock to their home. But I can hear it now. You say, “But I have a pool! I have an upgraded kitchen!” For most buyers looking at a specific price range, this won’t make a difference. Buyers often select the best priced home in a neighborhood – not the most expensive. This is where the seller is chasing, rather than leading the market.
Low Ball Offers: If your home has been on the market for several months, buyers will think you must be getting desperate. Therefore, this is when the low ball offers come in thinking that a seller will be happy to unload their property.
Chances are, the real estate agent you hired will tell you. But real estate agents can’t make you list your property at their price. Many agents will decide not to represent if a listing price is too high as they don’t want to spend their time and budget on a home that won’t deliver any traffic.
Your Home Is By Far The Highest Priced In The Neighborhood: Again, buyers and realtors are more interested in homes that are priced correctly.
You Haven’t Received A Single Offer After A Couple Of Months: While this may not be a time for panic considering the current real estate market, and if your home is on the higher price end, which often takes longer to sell, you should have had reasonable traffic. What’s reasonable? Believe me, you will and your agent will know.
You Hired The Realtor Who Recommended the Highest Price: If you followed our suggestion from previous blogs, and interviewed at least 3 real estate agents, and you hired the one who suggested the highest list price (several thousand dollars more than the others), then chances are, you got bad advice.
No Showings Are Scheduled: Once your home hits the market, there should be some appointments and showings. If not, chances are local agents feel the home is overpriced.
What’s Important To You, May Only Appeal To A Small Group Of Buyers: A seller may have all of the top of the line amenities in their home, but many don’t hold broad appeal. While you may enjoy a home theatre, it’s not on the top of many buyers’ lists today.
So by now you probably get the picture. An overpriced home doesn’t generate your target buyer to your home. The longer a property sits on the market, the longer you make mortgage, utilities and insurance payments. Also, if you have your eye on another home you would like to purchase, or if you are in a contingency agreement, you have a good chance of losing that home as well.
So price your home correctly from the get go. When a home is priced right, or even just a little below, buyers will come. If you present a listing at a price that buyers like, you also are creating a perfect storm opportunity: a bidding war where the price might actually exceed your listing price.