Why Pricing Your Home Too High is a Big Mistake

Selling your home can be tough, especially if you make some common mistakes. Stay away from those mistakes and you may find it's not as difficult as you thought. One of the most common mistakes and most detrimental is when home owners price their homes too high. How you price your home in the market significantly affects whether the home will move relatively fast or stay on the market for significantly longer than needed.

Pricing is the single most important factor in the marketing of a home - between 80-90%. No matter how great the exposure, an overpriced home will not sell! Remember that your home is being compared to all the other homes on the market in the same price range. If your home is overpriced, the other homes in that price range will always look better than yours, and therefore they will draw the buyer offers rather than yours.

In a decent buying market, a fairly priced home will nearly guarantee offers coming in within weeks, days or even just hours of being listed. Often, a fairly priced home will even draw multiple offers. Interesting to note, that multiple offer situations offer you the the very best chance of selling for more than the true value of your home, simply because of the competitive mindset of buyers. Let's repeat that... if you overprice your home, you'll likely get less than fair market value because the home will stay on the market too long and become "shop worn". Fairly price your home, and if you generate a multiple offer situation you may sell for more than the homes true value.

But determining the right price is not easy as you might think. If you could just grab a Zillow “Zestimates” of your home's worth, real estate agents would be extinct.

Below are the four main reasons folks price their home too high, and in turn kill their chance to get their best price and quickest sale.

Pricing the Home without a Professional Real Estate Agent's Comparative Market Analysis

Determining the right and fair price for a home is not an easy task. An experienced real estate agent will take into account many different factors before coming to a final pricing suggestion.

While completing a CMA (comparative market analysis) the agent will look at all the features of your home, the individual condition and popularity of each of those features, and how those features compare with recent home sales, as well as all the other nearby homes currently listed for sale. For example, a home in excellent condition, but with many features considered to have an outdated style would be a net negative if other available homes for sale have been significantly updated.

Many sellers have no idea what a CMA is because their agent never took the time to create one for them. A CMA in a community where the homes were all built by the same builder and with only a few different building plans is far easier than in a community that used several different builders and a wider variety of home plans, styles and features.

Pricing the Home High to Leave Room to Negotiate

Far too many sellers feel most buyers will low-ball offer on "any" list price a seller has indicated. The truth is, fairly priced homes will generally pull offers close to asking price. Most buyers have been looking for weeks or months to find the right home at a fair price. When the right home at a fair price shows up, they are afraid another buyer will simply offer that fair list price first and take the home from them. Fairly priced homes are an incentive to buyers to make offers at or close to asking price.

Listing your home for 5% more than the fair price so you have room to negotiate is therefore a big mistake. Today's buyers are informed and savvy, and overpriced homes simply make similar homes that are fairly priced look more appealing. If your potential buyer sees another similar home offered for less (an actual fair price), they will be inclined to attempt to purchase that home first. You won't even know that you had a potential buyer within your grasp.

Pricing your home fairly will more often bring you offers at a fair sales price than overpricing your home. Sure, there are some buyers that may "test" your commitment to your list price, but that test is often very short lived with a follow-up offer being near or at your asking price.

Your Home Priced High because You Have Time

It's not rare to have sellers say, "We're not in a rush to sell, so we'd like to price our home 10% over fair market value and just see what happens - maybe we'll get lucky."

Two things to consider:

  1. A real estate appraiser (who works for the bank) will likely never approve of a value that is too high. If the home doesn't qualify for the loan amount your buyer is requesting, the contract won't close.
  2. it is critical to understand that right now as your about to put your home on the market, there are multiple buyers that have already been looking at homes for weeks or even months. This is by far the largest group of buyers you'll ever have looking at your home at one time. All these buyers have been waiting every day for new listings to appear, racing to get to the most appealing new listings the fastest in order to write offers on any great new listing that shows up at fair price. If you price your home too high, those buyers will either look at the home and simply not write an offer because they know they're not willing to come anywhere close to what your asking. Worse yet, they will determine your home is way overpriced before ever coming to see your home. From that moment on those buyers may NEVER look at your home again. They won't remember exactly why it was that they were not interested in your home, just that it was another of the dozens of homes they previously were not willing to consider. Those buyers will keep their attentions on only the fresh new listings, while your home continues to sit.

After that initial group of buyers has bypassed your home, you are now likely to only bring in the trickle of new buyers as they individually enter the home buying market. Now you have a negative "stigma" attached to your home, because it's been on the market for so long without selling. New buyers often see old listings as having some blatant issues... perhaps the home smells of cigarettes, or it has inspection issues. There must be something wrong with the home or it would have already sold. It doesn't matter where their imagination takes them on why your home hasn't yet sold, if they don't come to see your home, you've again lost opportunities to sell it for a fair price.

Using The Real Estate Agent Who Suggests The Highest Price

In every market there are hundreds or even thousands of real estate agents. Atlanta alone has well over 6,000 agents.  And like any other business there are true professionals, and those that are simply not. Of those that are not true professionals, some are not because they simply haven't put the time and effort into building their skills. Sadly though, there are others that put their interests over yours. Like every business, not every player has the same principles. These are the facts of life.

In our business, those agents who intentionally tell their seller prospects their homes are worth more than they they know that those homes are worth are said to be "buying their listings". Of course, sellers want to hear their home is worth many thousands more. Those extra bucks would mean a new car, a great vacation, extra money for the kid's college fund, or whatever.

This way of doing business is not only dishonest, but extremely harmful to the seller's interests (which every agent is supposed to consider first).

Why would agents want to do this? Certainly the agent knows the house won't sell for that much, right? So how would this benefit the agent? This over-pricing technique does two things for the agent.

  1. These agents hope to show more inventory which makes them look like a more powerful agent in front of other potential sellers when they're trying to gain their listings.
  2. These agents "use" overpriced listings to generate buyer phone calls from their signs, print and Internet advertising... buyers they intend to sell other, more fairly priced homes to.

Of course the agent also hopes that if enough time passes, you simply buckle on pricing later and unknowingly drop your home below fair market in order to move the property. As you can see, sellers can lose big working with these kinds of agents.

Not as prevalent in our business today as 20 years ago, but these agents do still exist. This is the "used car salesman" side of the business that continues to stain by association the reputations of other highly experienced and honest agents working today.

Price it Right!

What we're hoping you'll learn from this page: Price your home right, and it will sell! Overpricing is an error you can avoid. Be aware, investigate your potential agents, look for signs of true credibility, get a CMA and price that home fairly. You'll do fine and will dramatically reduce your stress as you move through the process of listing, showing and selling your home.

There is one variable we simply can never directly put our finger on. We can never know exactly what buyers are truly in the market for a home like yours. If the home is properly priced, you should have multiple and consistent showings within the first couple days on the market and also an offer in hand within the first couple weeks! If you're not getting consistent showings, and the condition of the home is good, there is a reason the home is not selling - and it's usually the price is too high for your current market!

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