In a booming real estate market, your home is your investment – and it is important that you get the most for it. So why not ‘shoot for the moon’ and list $10,000 or $20,000 over market value? After all, if you don’t get any offers, you can always drop the price… Right?
Problems With Overpricing
Although it may be counter-intuitive, listing ‘high’ can ultimately damage your bottom line by making buyers see your home as ‘undesirable.’ Here’s why…
- When you have to drop your price, you are ultimately bidding against yourself. Buyers see that and are already in the mindset to send you low offers.
- Every day that your house is on the market is another day for buyers to think, “If it hasn’t sold by now, there must be something wrong with it. I bet they’ll take a lower offer.” If your house is priced high for too long, it may be difficult to even get full market value for it – just because of the perception that something must be wrong with it.
- You eliminate many buyers who would otherwise be interested. Buyers who intend to get a mortgage on your home know that the bank will have to appraise the house for the amount you are asking. If it won’t appraise, there is no point in even looking at the house.
- Overpriced homes only attract 1 or 2 buyers at a time. Fewer buyers means that the buyers are more likely to try and leverage your sale price downward.
- Frankly, buyers aren’t stupid. They aren’t going to pay over Blue Book for a new truck, and they aren’t going to pay over market value for your house. They will go and buy a better house for the same price, or they will wait for the next house to come up.
Free Advertising
Many agents will accept an overpriced listing just for the “free advertising.” You see, even if your home never sells, that agent gets to hang their sign in your yard and market their business. For them, it’s “free advertising.” This is why it’s a good idea to interview several real estate agents before choosing one to list your home. If one agent recommends a list price that is clearly higher than the others, that agent has a “list high” strategy.
FHR Perspective
One of the jobs of your REALTOR and their brokerage is to help you get the best price for your home. Statistically, that almost always occurs when the home is listed at (or slightly below) market value. At Forever Home Realty, we have a policy to maximize the return on your investment by pricing your home right. Let’s attract attention, to draw a crowd, to cause every buyer out there to want to see your house! We want to see you in a bidding war where buyers are bidding against each other to pay MORE for your home – Not a lonely bidding war where you are perpetually bidding downward against yourself.