The Problems With Overpricing Your Home
If you are truly looking to sell your home, then price it to sell. Ignore this advice at your own cost.
The process of selling your home is not an easy one. Not only is this probably one of the largest possessions you will ever sell, but it is also a very emotional one. You are selling something that likely means a great deal to you and your family. Ultimately – if you are serious about selling – you want the home to move, but you also want to get as much as you can out of the transaction. One part science, one part art, determining the best price to list your home is no easy task.
You need to take the emotion out of the process. This is business and you are selling in a market that will dictate much of your decision. As with most successful business/pricing scenarios, the market – in the end – always determines the price. Your job is to determine where your product – your home – falls into this larger market and price it accordingly. You can choose to ignore the market, but this is very risky and a decision that most people end up regretting. There are many risks in pricing your property too high, but the most important is that you run a very substantial risk of actually selling it for much less than if it was priced correctly. In the Watch Hill market alone, I can think of two instances in the last 12-months where the sellers probably could have gotten more for their home if it was priced correctly and had not sat on the market for so long.
Many sellers fail to realize that pricing a home higher than it should be does not increase the probability it will sell for more. It is the exact opposite!
Unfortunately many real estate agents will actually encourage you to list it higher. They are telling you exactly what you want to hear, and not what you should be hearing. By telling you your home will sell at an inflated price is merely playing to your desire to get as much as possible. In most businesses these people are referred to as “yes men” – they tell you exactly what you want to hear, and promise you the world. They play to your emotions and this is not good for several reasons.
Remember, this is a business transaction and the product you are selling – your home – is competing against other homes in a larger market. When you enter this market you want your home to be priced similar – or even better – than comparable homes in your area. If your home is not priced right, it may get ignored, or worse, noticed by buyers and placed into their “wait and see” category. Buyers today are more educated and market-aware than ever. They have multiple information resources and the serious buyers are aware of what is ‘on the market’. If your property is perceived as overpriced, and placed in their “wait and see” category, two things are likely to happen. First, they are likely to forget about your property altogether as other properties will be coming on their radar daily and they have no real reason to investigate yours, as they know it’s overpriced. The second thing that is likely to happen is that they will merely wait for your price to drop – which it likely will eventually – and then they will wait some more and your property is now stigmatized as “overpriced”.
Buyers know ‘value’ and that is what they are looking for, and what they are willing to pay. Remember, they are the market. The value of your home is merely what someone is willing to write you a check for. Until that moment, your idea of ‘value’ is merely your idea, not a fact.
This perception of ‘value’ is critical in all real estate transactions. A shift in attitude on the part of buyers away from this value perception can cause serious issues and lose you significant amounts of money in the long run. The longer your home sits on the market, the more you risk a negative shift in this perception. You want to avoid this at all costs!
When your home first goes on the market, if it is priced comparably with similar homes in the same market, buyers will perceive it in a neutral fashion. It may or may not be appealing to all buyers, but you have not given buyers a reason to see your property in a negative light – you have given it the best shot possible and now it is up to your agent to properly ‘market’ your home.
The longer the property sits on the market though, the more negatively it is viewed. In the buyer’s eyes, there must be something wrong with it. Additionally, buyers working through agents may be steered away from the property for the same reasons, or merely told to wait for the price to drop.
One of the questions that almost all buyers ask is “how long has this property been on the market?” This is their yardstick. This is how they judge the situation that the seller may be in, and how flexible they may be based upon the length of time the property has sat on the market. This is human nature, and only natural. Buyers believe – most often correctly – that if a property has been on the market for some time that the seller will be more flexible. When this happens, you the seller have lost negotiating strength, which also means you will likely lose money.
If you truly want to sell your home, you need to price it accordingly. If you price it out of the market, even slightly, you are wasting both your time and your money. A fairly priced home, one that it perceived as a ‘fair value’ in your market will sell.
Additionally, if your home is priced at the market level – or slightly less – you have a chance to stir enough excitement that possibly multiple parties may be interested. Real estate is ‘sales’, and selling has a strong psychological aspect to it. Buyers get excited about value, and excited about ‘finding’ good deals. This excitement, this exuberance, can sometimes cause buyers to actually overpay for product when they get into a bidding scenario. They are initially excited because they ‘discovered’ this good deal – this value – and now they are excited because they want to ‘win’ the deal from their competitor, their competitive buyer.
As you can see, the potential issues with pricing your property too high are significant – in terms of time and money. To avoid this, the best investment you can make is to hire a good agent that will not fill you with false help. This is not a time for “yes men”! You need to find someone that knows the area, knows the Watch Hill real estate market, and is not afraid to tell you the truth.
Remember, time is not your friend in this transaction. If you price your home appropriately you can sell it in a reasonable time frame. With a good agent, a healthy – and sometimes humbling – respect for the market, you can sell your home for a fair price. Selling a home is stressful enough; don’t add to your troubles with unrealistic and costly ideas of value. Seek out a professional and hear them out.
About Geb Masterson: Geb Masterson is a licensed real estate agent in Rhode Island and Connecticut and grew up in Watch Hill, Rhode Island. Geb has a sales, marketing, and entrepreneurial background and works full-time in real estate for Lila Delman Real Estate in Watch Hill. Geb can be reached at Geb.Masterson@LilaDelman.com