Most homeowners have a natural attachment to their property. They generally think that it is almost always superior to comparable properties in their area. If you are not careful this emotion can come back to bite you when it is time to sell. Every homeowner wants to get the highest price when they sell their home. However, long gone are the days when demand was so strong that you could list for almost any price and get an offer in 48 hours. In most markets, you need to price in line with recent sales and current listings. If you shoot for the moon you may not be able to settle for the stars on your way down. Here are four reasons you should never make the mistake of overpricing your property:
1. Poor First Impression. First impressions are critical when it comes to selling a home. Buyers, and buyer agents, can be greatly swayed by the initial list price. If the price is too high they will quickly dismiss the property and focus on other new listings. Instead of getting the quick jolt of interest you anticipate you will be left wondering where the buyers are. Even if a property checks all the boxes for a buyer they won’t be as inclined to pursue it if the price is well over fair market value. They know that you may have unrealistic expectations and can be difficult to work with.
2. Reduced Demand. The first impression of a property sets the tone for everything else that happens in the transaction. Instead of buyers flooding the property for an open house or to schedule showings they will go elsewhere. With reduced interest there is also reduced demand. Demand is one of the engines that drives prices higher. A lack of demand will prompt buyers to make offers without fear of competition. They know that there aren’t five other buyers who fell in love with the property and they can offer a number they are comfortable with. The less demand the fewer buyers to compete with and ultimately a good chance that the sales price will be lower.
3. Increased Days on the Market.Every day that your property sits on the market without activity it loses a bit of appeal. With an unrealistic price it is sure to sit on the market a very long time. Any open houses or social media marketing you do won’t be impactful because all buyers will see is the price. After a few weeks, or even months, the offers that come in will sense your desperation and be well below the asking price. Now, instead of getting a price above fair market value you are scrambling just to get back to that point. The longer you go without a sale the more likely you will need to act to spur interest.
4. Price Reduction.At some point reality will hit you in the face and you will hear what the market is trying to tell you. A lack of showings and general interest in the property should be a good sign that you are listed too high. With that you need to seriously consider a price reduction. With any price reduction you need to make it big enough that it has an impact on the market. You need to basically start the process over and generate interest ASAP. The downside of a price reduction is that buyers feel you are desperate and are now willing to entertain any reasonable offer that comes in. This leads to lowball offers and has you scrambling just to get back to fair market value.
The flip side of pricing too high is pricing right at fair market value. With that you hope to find multiple buyers who are interested in the property and start a bidding war, pushing the price higher. Every seller wants to maximize their price but listing too high usually isn’t the best way to get there.