Home pricing is one of the most important aspects of selling. It’s no surprise that homeowners are worried about pricing their homes too low. But one of the biggest seller mistakes is pricing a home too high. Indeed, in the current market, we have seen a huge rise in overpriced homes spurred by high buyer demand and low home inventory.
Sellers may hear that a friend, family member, or neighbor sold their home for an outrageous price and quickly list their home for something similar, for fear of missing out on the sale of the century. However, you should know that there are real consequences for listing your home well above its real market value.
Things You Should Consider for Pricing Your Home
Longer Time Spent on the Market
It’s true that we are in a spectacular market right now. And if you are thinking of selling your home, you could make out very well. Buyers are still just as savvy as they have always been. If you overprice your home, you risk it spending longer than average on the market.
Buyers will not want to see this overvalued price tag slapped on your home when they are trying to find a home on which they can make a reasonable offer. Even if it is perhaps a higher-than-normal offer fit for this surging market. If they see too high a starting home pricing point, they may simply chalk it up as out of their price range and not make any bids at all.
Thus this simple seller mistake can lead to overpriced homes spending months if not years on the market, losing their sellers the chance to capitalize on the market conditions that spurred them on to sell the home in the first place.
Price Cuts Send the Wrong Signals
When homes spend a long time on the market, it is not uncommon for their sellers to cut the price bit by bit the longer they wait for an offer. However, it is important to remember that these price cuts are well-documented by real estate companies. They can provide their clients with robust information about the long-term price changes of a property.
Buyers thus have the opportunity to interpret your price cuts as a show of weakness that both decreases buyer-confidence in your home (“They cut the price 3 times? Is there something wrong with it? Why are they trying to sell so quickly?”) and increases buyer-confidence that they have more room for negotiation than they would otherwise (“They cut the price three times. They seem desperate.”).
In the end, overpricing your home might lead to a lower sale price than if you had started lower. Or it may dissuade buyers from making an offer at all.
How to Price Your Home Without Overpricing
The market is the world’s greatest calculator. To avoid over-pricing, trust in both the prices of comparable homes for sale in your area. Also, take into account what similar homes have actually sold for. Though you can add a bit to the sale price to provide some room for negotiation, there is no good fixed percentage by which to do so: home pricing is an art that depends upon experience. It is often worthwhile to find a trustworthy team of real estate experts who have experience with combing through hundreds or thousands of data points to justify a suggested listing price.
How to Test a Higher List Price
Working with real estate experts can also be a great advantage due to their ability to use different tricks to test higher list prices without setting them in stone. For example, real estate experts may create a ‘coming soon listing’ that is distributed to other real estate firms. This listing can be 10 or even 20% higher than their suggested listing price. Depending on the response they receive from other agents, they can gauge what the actual list price should be.
Here at Path and Post, we’re dedicated to helping sellers get the most out of this seller’s market. Contact us if you need help getting the highest price for your home, without the self-sabotage of overpricing.