The Dangers of Overpricing Your Home
by Bill & Lia McNally
Brokerage: iPro Realty Ltd., Brokerage
Setting the right Price...right away
Setting the right price for your home is crucial. If the price is too high or too low it could wind up costing you thousands. We closely examine a variety of factors, such as comparable sales and market trends to arrive at a realistic selling price.
The selling price of your home is a simple function of supply and demand. The agent can't set the selling price anymore than a stockbroker can dictate the price of stocks. For that reason, beware of the agent who flatters you with an unrealistically high listing price. This shady sales technique is referred to as "buying your listing." Usually the agent knows full well that your home won't sell for the price they're recommending and intend to talk you down at a later time.
Many sellers are tempted to ‘try' for a higher price. We don't recommend this because most often the seller will end up with less money than they would have if their home had been priced right from the beginning.
What happens to an overpriced home?
The first few weeks your house is on the market are the most productive. If it's overpriced it won't attract the right buyers and you can easily miss this window of opportunity. Buyers typically stick to their price range when shopping so the buyers you should be attracting will be put off by the price and won't even see your home. Those who do see it will compare it to others they have seen for the same price and realize they can get more bang for their buck elsewhere.
After your house has been sitting on the market for awhile, buyers may incorrectly assume that something is wrong with it. Your listing becomes stale and showings slow to a crawl. In order to create interest, a price drop is necessary but by then the damage has often been done. Buyers think you must be getting anxious to sell and wonder just how much lower you'll be willing to go. Offers received at this point will typically be below market value and if you need to sell you'll have little choice other than to accept.
On the off chance you do find someone to buy your home at an inflated price, often the financing will fall through. This is because the lender won't be able to justify the price as it relates to loan value, consider it a high risk and refuse to loan the mortgage funds.
So, the bottom line is, you're better off pricing your home right from the very beginning. You're going to get more interested prospective buyers through your door, you're going to get better offers, it's not going to take as long to sell your home, and you can get on with things and move on to where you've got to be.