When the real estate market is hot and you see other people selling their homes for more money than they ever dreamed possible, it’s tempting to “shoot for the moon” and set the price for your home sky-high – but you’d better think twice before doing so.
Naturally, you want to make the most out of your home’s equity. Pricing your home too low is the same as leaving money on the table. Pricing your home too high, however, can be an even bigger financial disaster. Some of the main dangers include the following.
Your House Can Sit on the Market Longer
Potential buyers are a savvy lot, so they know the market conditions and are usually well-versed in what’s reasonable and unreasonable when it comes to the average home price. When your home is priced significantly higher than similar properties, it’s going to sit for a while – and that can make your listing grow “stale.”
You Can Miss Some Golden Opportunities
When listings go “stale,” there’s a cascade effect. The first few weeks a home is listed on the market is when it receives the most attention from buyers and buyer’s agents. If your home is overpriced during this initial time, you risk missing out on serious buyers who might have otherwise made you an offer. Once those buyers have moved on, they’re unlikely to reconsider – even if you later lower your price. You can be perceived from afar as simply “asking too much” or as being difficult to work with (even if you aren’t) and that can make would-be buyers hesitant to engage with you.
Overall Buyer Interest Can Start to Falter
Most buyers today start their home-buying journey online. If your home is on the high end of someone’s price range and has been sitting on the market for a while, they may automatically wonder, “What’s wrong with this place?” and keep looking.
The Carrying Costs Can Start to Add Up
Have you already moved into your next place? The longer your old home stays on the market, the more you will have to spend on “carrying costs,” such as mortgage payments, property taxes, insurance and maintenance. These costs can add up quickly, eating into any potential profit you might make from selling your home. Overpricing can turn what should be a straightforward sale into a prolonged and expensive ordeal.
You May End Up With a Lower Final Price
Ironically enough, overpricing your home initially can lead to a lower final sales price. The longer your home is on the market, the more likely it is that you’ll have to reduce the price to reinvigorate would-be buyers and attract some interest. But that’s a little bit like hanging out a sign advertising that you are desperate to sell. That can encourage bargain hunters to offer you less money than they might have before.
You Can Encounter Appraisal Issues
What if you’re the exception to the rule and you actually find a buyer who is willing to pay the inflated asking price? Well, you still have to get past the appraisal. If your home doesn’t appraise for at least the agreed-upon price, your buyers may not qualify for a loan. If the deal falls through, your property can end up right back on the market, with all the stress that entails.
How Do You Price Your Home Correctly?
The better you understand why people overprice their homes in the first place, the easier it can be to avoid making that mistake yourself. Usually, overpricing a home comes down to the following factors:
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Emotional attachment – The sentimental feelings you have for your home are normal, but you can’t allow that to guide your moves. Buyers are looking at the bottom line.
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Misunderstanding the market conditions – Market trends are often a lot more complicated and fluid than you might realize. In a hot market, it’s easy to believe that “every” house is going for more than fair market value.
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Poor strategy – You may expect buyers to try to bargain you down, and you want to leave yourself room for negotiation while still getting the best price. This can backfire by decreasing interest in your home, leaving you with nothing but lowball offers.
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Misleading comparisons – Online websites like Zillow can give people an inflated sense of their home’s value that doesn’t match up with real-world experiences. This can lead to unrealistic expectations and the assumption that because their neighbor’s house sold for a certain amount, their own will, too.
So, how do you avoid the pitfalls of overpricing? First, you need an agent you can trust, like those at F.C. Tucker. An experienced agent has a deeper understanding of the nuances of the local market, and you can generally rely on their expertise when pricing your home. After all, your agent earns their money on commission, so they also have a vested interest in making sure that you don’t underprice your home.
Broadly speaking, your agent will conduct what is known as a comparative market analysis, or CMA. This will provide you with data on recently sold homes in your market area that are similar to yours in size, features, and condition. This can help you better understand the high and low end of your price range. You can then use that data to guide the price you set. If you have any doubts, you can also hire a professional appraiser to make sure that you are getting an unbiased and unvarnished take on your home’s true worth.
What’s the Bottom Line?
Essentially, it comes down to this: Selling a home is an inherently stressful process, but overpricing can only add to the frustration you experience. Preparing for home showings, fending off lowball offers and worrying about how long your home will take to sell can really take a toll on your emotional and financial well-being. There’s no upside to overpricing – so work with your agent to set a realistic asking price.
