Drawbacks of overpricing
Why the best price is the right price
There is no doubt that next to choosing an agent, pricing your home is the most critical decision that you will make in selling your home. While the disadvantages of under pricing are obvious, the consequences of overpricing can be equally devastating. Many homeowners have lost valuable time and home equity by overpricing real estate. Here are some of the potential drawbacks of marketing your home out of its proper price range.
Longer market time
Homes priced outside of their value range invariably take much longer to sell. The longer a home sits on the market, the less valuable it becomes from the perspective of those that matter most, home buyers. Nobody gets excited about a property that has languished on the market for months on end. In fact, the longer a home remains on the market the greater the tendency for buyers to low-ball on the price. A National Association of Realtors study found that homes that sold within the first 4 weeks of the listing period sold at an average of 2.9% below list price. Those that sold between 4 and 12 weeks brought 4.8% below list. 13 to 24 weeks? 6.4% below. Finally, those that took more than 24 weeks to sell sold at 9.1% below the asking price.
The first few weeks of the listing period usually produce the most showings. If you price your home outside of its value range, the buyers that would be most interested in your home will not see it because it will not meet their price criteria. Buyers shopping in the higher price range will not likely view it because there will be competing properties that are larger, or offer more amenities for the same price. Even if you subsequently lower your asking price, it will be difficult to create the excitement that was lost initially. By pricing your home within its proper value range, you have the opportunity to have your home shown to the greatest number of potential buyers, thereby creating for you, a more competitive environment in which to negotiate a sale.
The average buyer looks at many homes before they find one that’s perfect for them. There is little chance that they will not pick up on the fact that your home is overpriced. Even if they like your home, buyers are not likely to write an offer on a home that is overpriced. They don’t want to offend you by coming in too low. Further, they don’t want to get involved in a lengthy negotiation with a seller that they might perceive to be unreasonable, tying up their deposit funds.
Even if you are fortunate enough to find a buyer that is willing to pay more than market value for your home, you’ll likely face additional, and often-insurmountable problems later on. The largest majority of homebuyers require some kind of financing to purchase real estate. Financial institutions typically require a property appraisal from a certified appraiser before approving a mortgage application. They want to make sure that they are not lending money on a property that has sold too high for the current market. Home sales that occur above market value typically fall apart at this stage.