Overpriced home listings usually don’t sell in any market. In today’s market, there’s no margin for error when selecting a list price. If your price is too high, the market can literally pass you by.
Many sellers ask: What’s the harm in pricing high initially? You can always come down. While this is true enough, you may end up with a lower selling price if you start too high to begin with, particularly if the market is declining.
Today’s real estate market is generally balanced, although there have been modest declines in median sales price in some areas. Prices are still going up in areas with low inventory and high demand, but the appreciation rate in these areas is slower than it has been in recent years.
Given today’s market conditions, buyers are more cautious about home purchases than they were last year. They are looking for value. A high price sends a message that you are out of touch with the market. Making an offer takes a lot of time and energy. Most buyers aren’t willing to do this if they think that the seller is unreasonable.
Another factor that can keep buyers from making offers on overpriced listings is that they don’t want to offend the sellers. Buyers feel that a low offer might jeopardize their chances of buying the property. They’d rather wait to see if the sellers lower their price before making an offer.
There is more emotion involved in a home purchase than in most other business negotiations. Home buyers usually need to feel passionate about a property before they’ll make an offer. Today’s buyers are concerned about overpaying in a soft market. It’s hard for them be enthusiastic enough to make an offer if a listing is priced too high. A listing that might look great to them at the right price might not even be appealing at an above-market price.
So, one risk of overpricing is that you don’t receive any offers at all. Another related risk is that your home might not even be shown to buyers if it’s priced too high. There usually is a direct correlation between the amount of showings a listing receives and the time it takes to sell.
HOME SELLER TIP: Sellers who live in areas where prices are declining need to be particularly careful not to overprice their homes. Before your home goes on the market, ask your agent to update the market evaluation of your home that was done before you listed to make sure that the recommended price range still holds. If not, readjust the price before you hit the market. Your home is most marketable when it’s new on the market. So capitalize on this enthusiasm by presenting a good product at the right price.
Since the market is always changing, you may find that your list price could be too high soon after your home is on the market. Many sellers object to lowering their price too quickly. They’re afraid they’ll leave money on the table.
However, the best time to lower your price is as soon as you discover that the price is high. This way you quickly rekindle interest in your property. Leaving your home on the market too long at a high price can cost you money if prices decline.
After your home is on the market, keep an eye on your competition. Ask your agent to keep you informed about listing activity in your area. Find out which listings are selling and which aren’t. How does your home stack up in comparison?
THE CLOSING: Pricing lower than your competitors can often bring about the desired result.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.