Overpricing Your Home: 3 Reasons This is a Bad Idea
August 20, 2015 | Richard Sites
Overpricing your home is the # 1 way to end up frustrated, disappointed and receive less money than you might otherwise realize from the sale of your home. How could this be true?
After all, isn’t there someone out there, with all cash, that might fall so heavily in love with your house that they pay what you are asking? The answer is no. So let’s drill down a little and see why.
THE APPRAISED VALUE IS WHAT MATTERS
No matter what price you are offered on your house, the appraised value is all that matters to a lender. I have written about this before. So what difference does this make?
When you get an offer with a mortgage or financing contingency, the buyer needs to borrow a certain amount of money in order to make the purchase. If they can’t borrow enough to cover the purchase, the deal falls through and the house goes back on the market. This morning 6 houses came back on the market because the deals fell through.
Each of these houses was off the market during the financing contingency period so the sellers lost 3-4 weeks of market time. Now, they have to start the sale process all over again. Even with documentation to prove that the buyer could afford the loan when the offer was made, without an appraised value to support the sale price the deal could be dead.
MOST ACTIVITY HAPPENS WHEN A HOME FIRST GOES ON THE MARKET
Most activity occurs in the first 3 weeks after a home gets listed and buyers, not the seller, determine what the home is worth. After all, they are comparing multiple homes and you, the seller, are not.
When you list your home, hopefully you have taken your professional real estate agent’s price opinion and not Zillow’s Zestimates or a price you picked up from talking to the neighbors. Assuming this is the case, there are buyers right now looking in your price range who are using any of the multiple websites available to monitor new listings. In fact, they are probably getting daily updates on new listings. So while you have only your house the buyers have been looking at ALL the competition and know what your house is really worth. So you must price the house in the sweet spot to attract the most buyers.
IT CAN BE STATISTICALLY PROVEN THAT IF YOU EXCEED THE MEDIAN NUMBER OF DAYS ON MARKET FOR HOMES LIKE YOURS YOU WILL HAVE TO TAKE A LOWER PRICE THAN OTHER SIMILAR HOMES IN ORDER TO GET IT SOLD
This is where you can get fooled by thinking, “let’s start high, we can always come down”. I once had a friend with a degree in statistics from Georgetown University who showed me that when you exceed the median number of days on market for a certain data set of houses, the amount you have to drop the price to in order to get a sale will be less than you would have received if priced properly when originally listed. Make no mistake about it, getting the price right at the beginning is the secret to taking home “the big check”.
And if your price point is much higher than what a professional real estate agent says, give some serious thought as to why yours is higher. I suspect the reason is that your house has all those special features you, and only you, know about and buyers don’t care about.
If you would like to have a no pressure conversation about getting your house sold quickly and smoothly use the form below or contact me directly at 561-762-4073. I sold a home for $1 million my first month in the business which had been listed for 2 years with other agents and I can do the same for you.