Avoid the Pitfalls of Overpricing
Are you getting ready to sell your home? Hopefully, you’ll be enlisting a Realtor to list and sell your property. Although your Realtor will provide you with what’s called a Comparable Market Analysis along with other data to help determine the value of your home, it’s ultimately up to the you as the seller to determine the list price of the property. When it comes time to sell your home, beware of the temptation to overprice your property! Sure, you may be listing during a sellers’ market, but there are several valid reasons to be realistic when pricing your home. Let me explain.
WHY SELLERS OVERPRICE PROPERTY
First, let’s look at WHY sellers overprice their properties. It could be one or a multitude of reasons that a seller believes his or her home is worth the high price.
Perhaps the seller built the home him or herself and saw all the hard work put into it. That could lead to an inflated value if the seller is putting a monetary value on the emotional cost of building the home.
Improvements may have been made to the property or money spent on cosmetic features. The sellers may be too focused on their Return on Investment. Unfortunately, that’s not the way the market works. Your house is only worth what a buyer is willing to pay for it.
The sellers may think their choice of décor is phenomenal, but potential buyers may not be into purple walls or pink toilets. You cannot put a value on your style. Neutrals are almost always best as it allows potential buyers to imagine various décor styles.
Finally, sellers may think if they start the price really high, they’ll have room to negotiate. However, in real estate, it is better to create interest and demand in your property rather than having to chase the market and search for the demand. When you price your property right, the interest and sense of competition may even create a bidding war.
WHY SELLERS SHOULD AVOID OVERPRICING THEIR PROPERTIES
The longer the property is on the market, the more potential buyers and realtors will wonder what is wrong with the house. Realtors can easily find out how many days the property has been on the market. For the most part, more days on the market suggests the property is not in high demand, and therefore, the property is not worth what it is listed for.
Frankly put, high prices scare away buyers. Buyers want a deal, and their realtor will inform them if the property’s price is inflated. Chances are if the current owners don’t realize their property value is inflated, they won’t be willing to come down to a market-value price.
Let’s say you find a buyer willing to pay the inflated price on your home, but the buyer needs a loan. The lender will order an appraisal to determine and confirm the value of your home. If the appraisal determines the value is lower than the contract price, there’s a good possibility the loan will not be approved, and the deal could fall through. You could be missing out on realistic offers during this timeframe.
Lastly, when it comes to searching for properties these days, both buyers and Realtors will most likely use a search query to get a list of properties within the buyers’ price range. If your property is overpriced, it will not even show up in the search results. You’ll be missing out on potential buyers and offers by holding out for an uneducated buyer.
WHY REALTORS WILL AGREE TO OVERPRICE YOUR HOME
I will use an excerpt from Bill Gassett’s article Why Overpricing a Home Creates Damaging Effects to explain why some real estate agents will agree to list a property at an inflated price.
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 exactly 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.
A Realtor who purposely tells a seller their home is worth more than the true market value does so for a couple of Reasons.
- The first is using your home as an advertising vehicle to pick up buyer clients.
- The second is a strategy designed to get you to sign a listing contract with them because they can’t beat out a good Real Estate agent otherwise.
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 are part of a lousy agent’s game plan. There are lot of great real estate agents who don’t have overpricing a home as part of their game plan. It is your job to find one!
Many will advise you that it is better to list a little lower, and encourage a bidding war, than risk all of the problems that listing too high brings. Stay realistic in your pricing, and accomplish your ultimate goal of selling 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 all of the rest of the marketing will be pointless.
In conclusion, it’s best to be realistic in your pricing and allow the basic principles of economics guide you to the right listing price. For more information about the Crested Butte real estate market, feel free to contact me at GHuresky@LivSothebysRealty.com or (970) 209-2421.