Home Sellers: Avoid Overpricing At All Costs
As you prepare to sell your home, you should be aware of costly do’s and don’ts that should be observed as the house goes on the market. However, with the possible exception of painting your home’s exterior a bright shade of hot pink, the most significant mistake you are likely to make involves overpricing.
Selling your home can be an emotionally-charged chapter in your life, which makes it all too easy to get caught up in the moment. Let’s face it – we are all biased when it comes to our homes. After all, our home conveys a special meaning to us that is unique among all of our possessions. Thus, we tend to hold onto a biased notion that our home ranks heads and tails above others of similar design, size and location, and, thus, deserves a “special” price tag when we part with it for good.
But, make no mistake about it. This notion could cost you greatly – in terms of time and money. And as hard as it may be to shake the conception that your home should easily fetch a price well above what the competition is seeking, you will have to do just that.
Force yourself to look at your home objectively, exactly as the buyer would. Also, enlist the aid of your Realtor to help you study the competition and the marketplace (current, as well as recent past. Try to learn why some houses sold in a matter of days, while others languished on the market for months on end.
You will probably find that many of those homes, which took forever and a day to sell, were most likely overpriced to begin with. Take note of this, and learn from those sellers’ mistakes. According to many Realtors, the best opportunity to sell your home comes within thirty days of its first appearance on the market. If a home is overpriced, most buyers entering the marketplace will bypass it. Thus, the prime opportunity for the seller vanishes quickly.
Other key reasons why overpricing of your home is a no-win situation:
- Value – buyers will sidestep your home if they feel it is priced well above comparable homes in the area. Why pay for a house that is overpriced, if they can purchase a much nicer home for the same amount of money elsewhere? Also, many buyers who may be on the borderline, as far as qualifying financially for a home comparable to yours, will likely be intimidated and just assume the home is out of their price range.
- Time factor – if your home is overpriced, it will most likely have to sit and wait it out until all the comparable homes in the area have been sold, since that’s where the home buyers will be flocking. Problem is – new homes similar to yours, but more in tune with normal market prices — will continue to enter the market in the meantime. In this situation, the competition wins while you play a waiting game that may never end.
- Stale factor – many potential buyers will notice when a home has lingered on the market for an unusually long time. They will often assume something is abnormal about the house, and will stay away from this “stale” property. Oftentimes, the utterly frustrated seller will end up trying to unload his property at a below-market price. Thus, he’s lost the opportunity to make a decent profit, while also losing time during the lengthy selling period — a time frame in which he could’ve been investing that profit, or enjoying his new home.
- Financing difficulty – if a buyer (from another world, perhaps) who is willing to pay the unrealistic price you’ve set is actually found, he or she will have to obtain financing from a bank or mortgage company. In that case, however, the lender will require an appraisal. Unfortunately, the home would, in all likelihood, be appraised for a lower amount than the seller’s price, resulting in a mortgage loan denial.
- Emotional/mental strain – The fact that you will need to continue to keep your home in spotless condition for showings while it’s on the market can take its toll on you emotionally, mentally, and, even financially. After all, it takes time to clean and maintain a home in “showroom condition.” And, as the saying goes, time is money.
It’s wise to remember that, after interviewing a few different real estate agents, it’s not a good idea to go with the one who recommends setting a price that is well above the market. That should tell you this he or she is either not really in touch with local market conditions – perhaps he or she is new to the area, and is used to working in another market where prices run higher.
Remember, as a guideline, many Realtors suggest that home sellers should not price their homes above 5% of the market average for similar homes in the area. However, even that 5% threshold may be too high depending on the local market conditions. A good Realtor should be able to advise you when market factors warrant slightly raising the price above the average.