The Dangers of Overpricing-
Most of us believe our homes are special. We have many reasons for thinking our homes are more valuable. Maybe we want to recoup our investment on costly improvements. Maybe our personal taste doesn’t match with current market trends. Maybe we did some misguided research, or maybe we’re just going with our gut. Whatever our reason for an unrealistic sense of our home’s value, they can all be deadly to a listing’s chances. Ironically, instead of getting more money overpricing usually stigmatizes a property and reduces the eventual sale price to less than it would have been if more realistic pricing was used at the beginning.
Here’s how it works-
Your first days and weeks on the market are the most crucial. When your listing goes live on the MLS, it triggers a cascade of events meant to help drum up interest in your property. Notifications are sent to buyers and agents through automated MLS alerts and search websites like Zillow and Redfin, when a home that meets the Buyers criteria hits the market. Open houses and broker tours will also populate the various sites and your agent will be marketing your listing with emails, social media, advertising and networking. If the home is overpriced, Buyers may not give it a second look.
A home usually has about a two to three week period to capture the attention of Buyers but once that period has expired, a listing starts to become stale. Buyers move on to the next new listing that may be more well priced and forget about this listing. In fact, the most common refrain heard when buyers visit a property is “how long has the house been on the market”. If the answer is more than a few weeks, many Buyers follow up with the question is “ what’s wrong with the house”.
The vast majority of Buyers will not make offers on homes they perceive as overpriced. Either they don’t want to waste their time or they feel uncomfortable with “offending” the Sellers. In any case, they simply move on to other listings.
Well priced homes create a sense of urgency in the Buyer and Broker community to act quickly with a strong clean offer and often lead to competitive bidding between buyers which is the most likely way to increase the sale price.
If a listing has been overpriced the sooner it is recognized as such and the price reduced, the smaller the negative impact. Price reductions must be big enough to gain the attention of buyers and their agents - typically at least 5%.
Ultimately, neither agents nor Sellers determine market value, only the market with willing and able buyers determines the market value. In the best case scenario, the agent and Seller work together to create a plan which includes fair market pricing, detailed preparation of the home and comprehensive marketing to maximize the conditions that through effective negotiation and management of the disclosure and due diligence process reliably achieves the highest possible sale price.