Dangers of Overpricing Your Home
Here is a real estate fact that every home seller should know: Buyers determine the right price for a property, not sellers. The market price for a home is determined by what an able and willing buyer ultimately pays for it. It is the logic behind supply and demand.
Overpricing your home discourages prospective buyers from making an offer since the difference between the asking price and market price becomes substantial. It will take longer to sell and if you are hoping for a fast sale, you're going to have a much better experience if you price it right the first time.
Risk of the Market Changing
A seller may list in March to a healthy, active market, but their odds of making a top-dollar sale fall as inventory increases, the economy slows or interest rates rise. New home construction is the biggest competitor to sellers. Builders offer "no closing costs", "$5000 in upgrades" or special financing. Being competitive requires a strategy.
Qualified Buyer Exposure
Overpriced houses fail to attract qualified buyers, or attract “wrong” buyers. Most buyers have little patience for writing low-ball offers on overpriced properties. They will wait until the seller lowers the price to the level they believe it's worth before making an offer. Price it properly and you many not need to negotiate.
Decline in Showings
Agents avoid showing overpriced houses in order not to lose credibility with their buyers. Buyers will ask their agent for advice on a homes listed price and a current market analysis of any property they are interested in.
Loses Prospects From Signs
Prospects who learn about the house from the sign get turned off because it is overpriced. A seller may actually be driving the buyers to a neighbors home that is priced properly.
Financial institutions and mortgage companies generally finance only a percentage of the real value of the house. If the house is overpriced, the appraisal may come in lower, at market value and break the deal or cause a contract price revision.
Waste of Advertising Dollar
Overpricing your home fails to get normal advertising response. This reduces the effectiveness of adverting and results in the loss of advertising dollars.
Less For Seller
Eventually market interest in the overpriced property completely declines. As this stage is reached, the seller now is faced with a price reduction or multiple price reductions. In the meantime he/she must bear maintenance and holding costs. The net result is that the seller gets much less than he could have if the house was correctly priced in the first place. Talk to your REALTOR® before over pricing your home. Review current market statistics and trends.