The 8 Dangers of Overpricing Your Home
An asking price that is beyond market range can adversely affect the marketing of a property. Here are the 8 dangers of overpricing your home.
Buyers and REALTORS® search within a price range when looking for a home using the Multiple Listing Service (MLS). If your price is above market value, your home will not come up in their search and you lose showings from buyers who can afford your home.
Helping to sell the competition:
Buyers comparison shop when considering a home purchase. When a buyer compares
an overpriced home versus one that is priced at market value it will likely convince them to place an offer on the well priced property instead of yours; you’re helping the competition get sold.
The perfect home for you to purchase may present itself while your home is listed. If you are overpriced, you will have very little chance of selling and therefore you won’t be in a position to buy your desired home. Watching another buyer purchase your dream home is not a fun position to be in, and it can be avoided with a well priced listing.
Low Ball offers:
If you receive an offer it is much more likely to be a ‘low ball’ offer, which results in a frustrated contract and a very low chance of getting an accepted offer. Today's buyers are quite saavy and overpriced listings don't survive their analysis.
Tough to Close:
It’s tough to close an accepted offer on an over-priced listing. This is due to the fact that buyers continue to look at the competition and they quickly realize they have overpaid, which results in buyer’s remorse and a collapsed sale prior to subject removal.
No Chance of Competition:
An overpriced listing will not result in competitive offers, whereby a well priced listing will have a greater chance of receiving offers from more than one buyer, and possibly getting an offer over asking. Real estate agents may forego showing an overpriced listing, as the price shows little motivation by the seller. Buyer’s agents are always keen on getting their clients through the doors of a well priced home first, in order to give their clients first crack at getting the home of their dreams. The best homes sell first.
Risk of falling market:
The longer a listing stagnates on the market the more likely it will sell for less than it would have had it been priced right in the first place. This used to be a coined term by Real Estate professionals, but now it is contained in a study by Ken Johnson of Florida State University.
Appraisals are required on all new loans. The appraised value is based on the recent sales prices of similar properties. If your home is overpriced, the appraisal may fall short of the offer, and the buyer, not willing to pay more than the appraisal price, will cancel the offer. The bank also will not lend money on an overpriced property to a Buyer looking for a high ratio mortgage, or 20% or less downpayment. A large portion of buyers are high ratio mortgage seekers.
These are just some, and by no means all the reasons why you should consider what the market is doing when it comes to pricing your home. By over pricing a home, you are esentially hoping to win 'the home seller's lottery,' meaning you are hoping that someone will come along and pay an unreasonable amount of money for your home, despite all the facts and comparative information available. In the long term, over pricing your home hurts the overall value of your home, while also sacrificing your time as you wait and learn that overpricing was a mistake.
For help pricing your home competitively while maximizing your return, Call me! I am happy to give you an honest opinion on what to expect.
All the best until next time,