Overpricing a home is, by far, the number one mistake, in any market, that home sellers make when listing their home. Real estate professionals are trained to perform comprehensive analysis of your specific house and how it fits in your area. Real estate valuing is an extremely local and specific skill set that takes knowledge and experience to perform. I suggest always leaning into that expertise when making this very important decision.
There are two main problems with overpricing. The first problems deals with the amount of showings at the beginning of the listing period. The first six weeks or so of any listing is the time to shine. There is market excitement around the listing and the highest volume of showings will occur during this time. Real estate professionals are, generally speaking, knowledgeable folks. If your listing is overpriced and the other 20-30 properties for sale in your area are priced right, your home will never get the attention in those critical first few weeks. So, it sits without any attention, the days on the market mount and you become increasingly frustrated. Also, you are alienating any buyer who could afford your house at the correct price, but not at the inflated price.
The second problem is centered around the appraisal. Let's say your house is valued at $300,000 and you are convinced you can get $350,000. OK, you do get a knucklehead to offer your $350,000 and you are flying high! You are throwing out one "told you so" after another at your agent. Here is where it bites you. Your generous buyer's mortgage company then comes into play. To protect their interest in the investment, the mortgage company will then send out an appraiser to value the property. The appraiser will look at the same properties that recently sold as the real estate professional who suggested $300,000 and value it the same. Guess what? Mortgage companies do not like to lend more money than the asset is worth. So they will grant a loan based on 300k not 350k. That means the buyer has to make the difference up in cash, you have to lower the price, or the deal falls through. Most buyers in that price range don't have an extra 50k to throw around nor do they want to overpay. What usually happens is the seller ends up dropping the price to the appraised value of 300k.
In that scenario, you have overpriced the house, reduced your showing volume, alienated any buyer who was approved up to 300k, and ended up selling it, if at all, at the price originally suggested. In any business, you want to create as much demand to buy your product as possible. The same holds true for real estate. Remember, sellers don't cause higher values in real estate. It is the market and the buyers in that market that push the values. Price it right and you will sell it quicker and for more money than you would if you overpriced it. Good luck!
If there is topic in real estate or other related field that interests you, let me know, and I’d be happy to research and present an essay or opinion on the matter. . .
Jim can be reached outside of this blog at 410.569.4663, Jim.Ellis@ReMax.net or www.JimEllisHomes.com
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