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Seven Problems that can arise from Overpricing a listing
Most sellers are having trouble coping with the fact that the market has an abundance of inventory and prices are much lower than the highs that everyone enjoyed in 2005-2006.
Most real estate experts advise to price a property for sale that is in-line with market but despite this logic, many sellers feel like it is necessary to leave room to negotiate and purposely price the property a few percentage point higher ultimately expect to end up. To understand the cost of overpricing a property there are seven problems that can occur as a result.
1. Appraisal Problems – If you are lucky enough to find an emotional buyer (one that doesn’t mind the inflated price) 90% of the time buyers will use some kind of financing to pay for their home purchase. If your home does not appraise for the purchase price you will most likely loose the buyer because they will not be able to obtain a loan. Not only that, you will have wasted a lot of your own time and emotions as well. (Hint – appraisers use the comparable properties on the market so the sellers should too)
2. No Showings – More than 80% of home buyers are well educated and use the internet for the initial real estate search. If they can clearly see that your home is overpriced, the odds are that they won’t want to bother to take a look at it in person, much less make an offer.
3. Branding Problems – When a new listing hits the market, every (good) agent quickly checks the property out to see if it might be a good property for their clients. If your home is immediately identified as being overpriced, agents will dismiss the property. As a result reigniting interest may take drastic measures (i.e. massive price reductions) and you might end up lower than where you could have been if you had priced the property right the first time.
4. Selling the competition – Overpricing helps other properties, not you. By overpricing your home, you make other properties with lower prices seem like bargains.
5. Stagnation – The longer your home sits on the market, the more likely it is likely to become stale. Ask yourself – have you ever seen a property on the market for such a long time and asked yourself “what is wrong with that house?”
6. Tougher negotiations – Buyers who do offer on your home may negotiate harder because they have more leverage and most likely they will be the only ones even interested in your home. Sellers who finally get a buyer, will often times settle for much lower prices than where they wanted to end up because having a home on the market without receiving any attention can be emotionally draining.
7. Lost Opportunities – You will lose a percentage of buyers who are outside your price point. These are buyers who are looking at the price range that the home will eventually sell in but initially their searches will not match their criteria because it will be in a different ballpark and the home will be above their pre-set budget.
Most buyers will often times look at 10-15 homes before finally making a decision to buy and because of this competitive pricing that inspires activity not only among buyers but agents as well can be the biggest way to get the best price possible.
Russell Grether of Compass Real Estate is a real estate agent based out of Malibu, CA. He specializes in Malibu real estate, Malibu homes for sale, Malibu properties, Malibu Land for sale, Malibu rentals and surrounding area real estate from Montecito to the Pacific Palisades. Contact him at 310.589.2471 or email him at [email protected]
