The Real Deal / Home sellers warned about perils of overpricing
Published 5:40 pm, Monday, April 9, 2012
You're putting your house up for sale. Your agent has recommended a listing price range based on current market conditions, how your house stacks up versus others presently on the market and what comparable properties have recently sold for.
But your agent's recommendation is not quite what you had in mind. What could it hurt, you reason, to list higher and see what happens?
Unfortunately, it could hurt a lot.
Overpricing is not a good strategy, even if you're in no rush to sell. Frequently, the result of overpricing is a home that eventually sells for less than it's worth -- less than it would have commanded if it had been priced right from the start. Here's how that happens.
On day one, you list your home higher than you should. Many agents won't even show it because they know their customers will recognize that it's priced too high. Those who do show it may advise their buyers to wait for a price reduction before expressing interest. Either way, you are not achieving your goal of getting your house sold.
Buyers who do visit your property are disappointed because they are shopping in a higher price range in which your home does not rightfully belong. As such, it is likely to fall short of their expectations. Your decision to overprice actually makes competitive properties look better than yours by comparison. It sells someone else's home instead of your own.
At the same time, buyers who would actually be interested in purchasing your home are not being exposed to it because it is out of their price range. This means your home is not coming up on their agents' computers when they do property searches for these buyers. Nor is it appearing on Internet shoppers' screens when they search in their price range online. As a result, you are missing out on the critical first two weeks of peak interest and activity that well-priced new listings typically enjoy. Without a quick price adjustment, it may be tough to recover from this.
Sixty days down the road your situation can become even more difficult -- even if you adjust the price. At this point, your property is no longer top of mind with anyone. Because it's been on the market for a while, agents and buyers may begin to view your home as an opportunity for a bargain. Potential buyers may start to think there must be something wrong with your property. Or they may assume that you'd be willing to accept an even lower price. Shrewd buyer agents will capitalize on this situation. This is the point at which lowball offers may come in. In fact, these may be the only type of offers you ever receive -- when you could have gotten fair market value if you had priced right from the start.
Although most good agents caution sellers about this scenario before taking the listing, overpriced properties are still common. In some cases, that's because the seller has an unrealistic number they want or need to achieve when they sell. That number may be the break-even point reflecting what they paid for the property plus the cost of improvements they have made. It may be what their neighbors netted when they sold last spring, or what the sellers need to come away with to afford their next home. Unfortunately, none of these things are reliable indicators of the market value of your home when you decide to sell. Looking at current market conditions and what comparable properties have recently sold for is the most reliable way to estimate market value.
In other cases, agents may contribute to overpricing. This can happen when agents know they are competing for your business -- and they err on the high side hoping you will go with the highest bidder. Other times, agents may conclude that it's easier to go along with you than to risk losing the listing.
You can protect yourself from the perils of overpricing by selecting an agent whose analysis is thorough and insightful and well rationalized. One who can answer your questions and who has the confidence to tell you the truth about the market and where your property will compete in it. When you do this, you will reap the benefits of pricing right, which include more showings, higher offers, a faster sale and minimal intrusion on your family's daily life to get your property sold.
Evi Coghlan's "The Real Deal" appears every other Friday. She is a licensed real estate agent with the Riverside Avenue office of Coldwell Banker and a former marketing consultant to Fortune 100 companies. She may be reached at 203-247-6691, by emailing her at firstname.lastname@example.org, or visiting www.evicoghlan.com.