One of the most common and costly mistakes made by Sellers is setting an unrealistically high asking price. Every Seller wants to receive the highest price possible for their home, but losing sight of fair market value can have serious repercussions.A lack of objectivity may result in overpricing the home.
Sellers often subscribe to the theory that pricing high initially leaves room to negotiate lower and ending up at the price that the Seller wishes to receive. However, overpricing from the outset could actually cause you to end up settling for a lower price than you would have received by setting a realistic asking price based on market research.
We call this “following the market downward.” If your asking price is too high it may be avoided by an entire group of potential Buyers who might otherwise be interested in your home; they will think that it is out of their price range and never make an appointment to see it.
Savvy Buyers today research the local market even before acquiring an agent. Buyers will search available listings online and in most cases they will set a price range to limit the listings they view. If your home is outside of their range even by a few thousand dollars, it will not be on the Buyer’s radar.
After they complete their research online, most Buyers will then hire an agent and together develop a strategy to evaluate homes that match their needs within their price range. Occasionally an agent will provide information on a home above the Buyer’s maximum price point, but rarely too far above that boundary.
Agents who work with homebuyers know local market conditions and the listing prices of comparable homes. If they feel your home is overpriced, they will be reluctant to show your home to their clients for fear of wasting their time. It may not have occurred to you, but overpricing for your home for the market can actually help the competition! Your home’s higher asking price will make other nearby homes of equivalent size and quality look like steals in comparison. Astute selling agents for other properties will use the price gap between your home and their own as a further selling point of their listings. In addition, a high listing price can be a warning flag to Buyers, who use this for leverage during the negotiation process. If the asking price seems high without home improvements or features to warrant the difference, Buyers may assume that you are either A) not well informed about the market, B) not a highly motivated Seller, C) have a need for money, or D) are simply creating some bargaining room. If the Buyer believes any of these, they are likely to fish to determine how low your true acceptance price will be.
On the other hand, if your home has languished on the market as a result of a high price, Buyers may believe you are becoming desperate. Interested Buyers will always make lower offers as a result. Should you be fortunate enough to find a motivated Buyer willing to pay your asking price, you still run the risk of having the deal fall apart prior to closing. Most Buyers will use financing for their home purchase, and every lender requires an appraisal of your home’s value.
The appraiser will review your home to assess its value based on similar homes that have sold (usually within the last six months). If the appraised value is below the agreed selling price, the lender will only approve a loan for the lower amount. You may be forced to reduce the selling price or risk having the deal collapse, and your home return to the open market. When pricing your home, the best strategy is to remain objective and compare your home closely to similar properties on the market. Take the opportunity to visit open houses and pay attention to recent sales in your area. Are you more focused on selling quickly, or on receiving the highest possible selling price? Is the price you have in mind reasonable when compared with what other homes are asking for and selling for?
Will selling it quickly actually result in more money to you when you compare what the value of time on the market does to your bottom line?
Acting quickly to adjust the asking price is the best way to keep as much of your marketing momentum as possible. Depending on how long your listing has been on the market, additional marketing may be needed to help repair some of the “damage” done to the reputation of your home’s listing at the higher price. In some cases, you may be forced to slightly under price your listing to create additional interest. For more information regarding the market value of your property, please contact Julie Hardie (BIC) at 808.652.0468 or email@example.com.