The Dangers of Overpricing a Home
Overpricing can scare off buyers, leading a home to be on the market longer. Pricing a home correctly will avoid any problems when it’s time for the appraisal.
WASHINGTON – It is definitely best to price your home correctly as soon as the listing goes live. That's when the most eyes are looking at it. You want to create demand where buyers are chasing you instead of you chasing the demand for your home.
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Overpricing can scare off buyers and cause your home to be on the market longer. If you actually get it under contract, the appraisal could come in low, causing the lender to be unwilling to loan on the home. Pricing it accurately will attract a bigger pool of buyers, so there is competition and urgency, which is always the goal. If it's priced near market value or even underpriced, competition can create multiple offers and the final sale price will reflect what the market can actually bear.
The lack of inventory still makes it a seller's market, but demand has dipped since last year, and it's definitely slowed down since the frenzied 2020-22 market. Right now, many buyers are waiting to see if the interest rates go down as everyone is predicting. I think buyers will get more jittery and cautious as we get closer to the election, so listing a home sooner is probably best if you want to get it sold this year.
The longer a home sits on the market, the less negotiating power you have. Then if you decide to reduce the price, buyers may offer even lower thinking you're getting desperate since it hasn't sold yet. Or think there is something wrong with the home and make no offer at all. Plus, buyers do not want to hurt a seller's feelings, so if the home is priced higher than they feel it's worth, many move on without making any offer.
We're starting to see more price reductions because a lot of homes are currently listed at aggressive prices to test the market. No seller wants to leave money on the table, and the recent boom in real estate has given many hopes of cashing in on possibly their biggest asset, their home. But sales prices are based on what a buyer is willing to pay, which may not correlate to the figure the sellers have in mind.
Here are some interesting statistics from Zillow:
"We found that in the U.S. as a whole, homes that sold more or less as soon as they hit the market had sale prices that were only about 1% below list price, while homes on the market for about 2 months sold at 5% below. And homes listed for the longest amount of time (11 months on average) fared worst, selling at 12% below list price."
If you are looking to list your home, I suggest speaking with a real estate professional to get a good understanding of what's happening in your market.
Real estate is very local, so using a real estate broker within your community is best. There are many factors to consider before selling your home, so go with a pro who will give you your best chance of getting a price you can celebrate.
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