Common home pricing errors that you'll want to avoid
Overpricing real estate is one of the more common mistakes made by home sellers.
The reasons for overpricing that we hear most often are those listed below. On the surface, each of these points may seem to justify an above market asking price. In reality, they are all strategic blunders that put a home owners equity at risk, and ultimately lead to longer market times and disinterest from prospective buyers.
Setting the price based on amount invested
Sellers are often inclined to set an asking price based on the amount of money that they have “invested” in their home. They may take the original purchase price, the amounts that they have spent on improvements and then add what they consider to be a fair return to arrive at an asking price. This strategy is flawed. The amount of money you have invested in your home has no relationship to its current market value. Purchasers value a property based on what they can get out of a home, not on what you have in it. If other homes that are on the market offer better value, that’s where buyers will go, regardless of how much you have spent on your property.
Setting the price based on what you need
Some seller’s determine an asking price based on what they want, or perhaps “need” from the sale to achieve their future objectives. Perhaps they are moving to a market where homes are more expensive. Maybe they have a certain “maximum mortgage objective” for their next home. Sellers should be aware that the price of real estate in their destination market does not affect the value of their home in their current market area.
“I’ve got lots of time to sell”
Often times, sellers misunderstand the fact that more time on the market tends to work against them, instead of for them. The fact is, that typically things get worse over time instead of better. Consider this. Your property has been on the market for three months, priced above market value. It’s already been shown to almost every buyer that could possibly have an interest in buying it. They’ve all said, “thanks, but no thanks.” What are the chances that someone is going to come along and agree to pay too much for a home that nobody else seems to want? Yes, it happens, but people win the lottery too.
Hiring the highest bidder
Some home sellers speak with more than one real estate professional before they put their home on the market, and in theory, this is certainly a reasonable practice. Sellers may be tempted to list the home with the agent that comes back with the highest suggested list price and this is often a mistake. The best price is the right price, and not necessarily the highest suggested list price. In fact, the highest bidder may well be the weakest agent, least able to represent your interests capably. Some real estate agents might even purposefully over estimate your home’s value to secure a listing contract. After that, they begin to work you for a price reduction. Choose your agent based on the services that they are prepared to provide you and the experience that they can bring to your transaction. It’s these things that will be helpful in getting a top dollar sale.
“They can always make an offer”
Some sellers feel that buyers can simply make them an offer if they feel the price is too high. In fact, buyers seldom express interest in writing offers on overpriced homes. It ties up their deposit funds and is usually just a hassle attempting to negotiate on overpriced homes. Buyers are far more likely to continue searching than they are to “make an offer” on an overpriced home.