PDF Home selling mistake #1 – Overpricing
Many people have difficulty assessing the true market value of their home. (“Market value” is the price range within which prudent, informed and motivated buyers will consider the pricing to be reasonable.) Sellers may associate the home with many fond memories. Or, they think that their improvements and decorating efforts make it worth “top dollar”, and that’s what they want for it. While most have no accurate idea as to what their home is worth, some do have a fairly accurate idea of its true value, but decide to go with a higher asking price in hopes that someone comes along who falls in love with it. The sellers also believe that they can always lower their asking price later if there are no acceptable offers. They overprice their home, committing costly mistake number one.
The sad reality is that overpricing a home seldom results in a quick sale. People will inquire, some will actually visit it, but rarely does anyone make an offer. Buyers seem to be ignoring it. What’s happening?
First of all, Realtors can quickly spot overpriced houses merely by doing a quick drive-by and studying the listing information. They know what comparable houses in their area are selling for – it’s their business to know. More importantly, over 90% of home buyers research listings on the Internet before ever contacting a Realtor. So, most Realtors and buyers quickly cross the overpriced property off their lists, and move on. By the time the sellers decide it’s time to lower the price into its true market value range, many once prospective buyers have already purchased another comparable property that was reasonably priced. Of those who are still searching, many have already decided that your property is overpriced and they have stopped visiting your listing. The result – few even notice the price reduction.
What happens now? Usually, not much. Realtors and buyers consider the property to be “stale”. It often takes several price reductions before new buyers are attracted. Others, of course, will be attracted as well – the bargain hunters. They almost never pay the asking price, even if it is now reasonable. Rather, they “low ball” their offers – by as much as 15% or 20% below the new asking price. The end result is that the seller either cancels the listing to “try again next year”, or sells significantly below market value – often a year or more after the For Sale sign was first erected.
When this happens, the sellers often accept less for the property than its true market value when it was first listed. The true cost of overpricing also includes the monthly interest payments on the mortgage, as well as accrued municipal property taxes. Plus, all the inconvenience, aggravation and disappointment such sellers usually experience. To avoid this discouraging outcome, sellers should ask their Realtor to prepare a written Comparable Market Analysis (CMA) for their property. It will contain accurate Multiple Listing Service (MLS) information on recent actual sale prices for three or more comparable properties in the same area. It will also contain information on comparable properties currently for sale – i.e. the competition. Your Realtor will be able to give you sound advice on pricing that is backed up by these facts and figures. If your expectations are reasonable, your results should be as well.
Tim Harris
mailto:tim.harris@tradewindsrealty.com
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