Overpricing your home – is it worth it?
Everyone believes their home is worth more than it actually may be. We invest a lot into our homes…from buying them to renovating them, to regular care and maintenance. As we build equity we also build priceless memories. So it’s no surprise that when we sell our homes we want to get the most value we can out of them.
On occasion, myself (along with other agents) partner with a client who wants to price their home significantly higher than what market data shows the market will bear. I’ll be the first to admit that it’s okay to try to test the market…however, there is a strategy involved in doing so and, at times, a little luck.
If your real estate agent is urging you to lower your price…it’s always a good idea to collectively analyze market data, showing reports and neighborhood activity. As pricing strategy from the beginning can save you time and money in the long run.
Here are some ways you may know if your home is priced too high:
- Little to now showing requests/traffic: if no one is coming in through your door then you certainly won’t be getting any offers.
- Many showings and no offers: if you have a good amount of traffic coming through your door and no one is submitting an offer there are three reasons why this could be: 1) price, 2) condition or 3) location. If items 2 and 3 are fine and no one is offering on your home then the traffic is telling you you’re priced too high. It may be time to reduce in order to snag your offer.
- Feedback: your real estate agent likely uses a program such as Centralized Showing Service for agents to request showings. Once an agent shows a home, they’re solicited for feedback. If you’re receiving a lot of feedback stating that the price is too high…well, the price is likely too high.
- Broker open houses: your agent can host what is called a broker open house. This is an invite to ONLY other agents where they’ll walk through and give their candid, anonymous feedback. If there’s a consistent pattern of other agents stating your home is priced too high then it likely is.
Here are the issues can arise from overpricing:
- Statistically speaking, the longer your home sits on the market, the lower it will sell for. This isn’t a scare…it’s the reality as published by the National Association of Realtors.
- The longer your home sits on the market, the less traffic you’ll get over time. Your best times to receive an offer are within the first four weeks your home is active on the market (this can vary somewhat by subdivision, city and state market data).
3. Appraisal: If you’re lucky enough to get an offer when overpriced, then after the buyer’s option period is complete the buyer’s lender will schedule an appraisal. If your appraisal comes in lower than the contracted price then you’ll 1) either need the buyer to not care and have the extra CASH to make up the difference, 2) renegotiate the sales price with the buyer and amend your contract or 3) your deal will terminate according the the 3rd party financing addendum or contracted terms/rights to terminate the agreement.
How can you work with your agent to prevent an issue?
- Choose the right agent. Choose an agent who knows your market and presents data for you to discuss.
- Communicate with your agent. Make sure you work together and have a strategic plan. If you over price, have a pre-planned time for price decreases and agree upon what the first drop will be.
- Stick to it. Don’t pull your house off the market because you can’t get what you want for it IF you know you are overpricing it. Adjust and listen to the market before pulling the plug.
- Think like a buyer. Would you offer full price for a home that has been on the market for 100 days? Even 45 days? If you will be buying after you sell, put yourself in your own future shoes and use that to your advantage when selling.
- Be realistic. Pricing your home according to similar properties that have sold in your neighborhood, monitoring feedback and then making any needed adjustments will put you in a position to receive the best return on your home in the long and short run.
Here’s a few more notes from yours truly:
When a property is priced correctly for the market and its condition, it will receive offers. Statistics have shown that the first offer received for a home is almost always the highest. This doesn’t mean you have to accept the first offer, but you certainly don’t want to find yourself waiting months for another one…negotiate it out if you can.
And here’s one I tell all of my clients (buyers and sellers) and it’s one no one ever likes to hear…but if you think it over it’s 100% true:
The market price for a home is determined by what a buyer is willing to pay for it. Buyers determine the right price for a property, not sellers. There are certainly things that homeowners can do to influence buyers’ perceptions of their home’s value and hence increase the price buyers are willing to pay, but ultimately the buyers will set the price.