Is anybody out there a fan of the show “Antiques Roadshow?” Have you ever dreamed about showing up at one of those tables with some knick knack you’d had sitting on your shelf forever, only to be told it’s worth thousands and thousands of dollars? How would you feel, then, if a real estate agent came along and told you that your house was worth more than the market could bring you? Pretty great, right?
I wouldn’t be so sure…
Although it might sound great, believing this news - and making decisions based on it - can unfortunately lead you into trouble. Pricing your house is the most important part of listing your property, and pricing appropriately in a Buyer’s Market is critical if you want it to sell.
Here are some risks when overpricing your home:
Time is money – especially when it comes to marketing. For every month your home remains unsold, you’re paying taxes, mortgage, insurance, heat, electric, and water bills, which in some cases can add up to thousands of dollars a month. Sometimes, if you’ve already moved, you’re paying the expenses on two houses! Even if you can get a higher price by waiting out the market, these holding costs mean that you usually end up netting less money than you would have if you’d sold right away at a reduced price.
The longer the house sits on the market, the more it will appear overpriced to buyers and their agents. This may be just a matter of perception, but it has proven true time after time. Just like tired old merchandise, the house can develop a sense of being “shopworn,” and price reductions later are not as effective as hitting the market at the right price initially. Also, considering the market is still declining, the price you can get now will most likely be higher than the price you can get in six months. So if you price too high, you can end up making reductions and still not sell because you’re chasing the market down!
This may not sound encouraging, but it’s the reality of the current market. Accepting the facts will enable you to make smart decisions and probably save yourself a lot of heartache and money. It is important to get ahead of the curve. Buyers right now are very particular about the houses they are buying, and they’re afraid of paying too much. Make sure that you look at how your house will fit into the market alongside the current competition. When prices are going up, it makes sense to price your home above the market, but when they’re going down, the opposite is true: you should price below the market. This is because the comparable sales you are using to price your home are based on houses that went off the market some time ago - in some cases, more than six months!
Straightening up and preparing your home for showing after showing can be extremely wearing, stressful, frustrating, and otherwise draining. If your house is overpriced, you will have to go through that many more showings before you get an offer.
Make sure that your realtor’s CMA (Comparative Market Analysis) makes sense to you. Are the comparable properties the agent chooses in the same (or similar) neighborhoods, and are they the same general size as your house? Are the comparables on lots of the same size, with similar amenities such as water views and a garage? Make sure that you look at what buyers are paying for homes like yours, and not just what other homes (which have sat on the market for the last year) are asking. Make sure that your realtor is experienced in creating CMA’s and has up-to-date data regarding the market and which way it’s heading. Don’t be fooled by an agent who, while trying to compete for your listing, tells you what they think you want to hear, rather than giving you a true assessment of the market and what your house is really worth. Some agents might even give you a higher price to get the listing, hoping that you will bring your price down once it has been on the market a while. As you’ve noted by now, this strategy is not in your best interests.
Your house will receive the most attention during the first few weeks it is listed. There may be a pent up demand for a house like yours, and several buyers may be looking for such a property at your price point. Don’t miss out on a possible multiple bid situation by pricing your property too high to start. Remember, too, that your first offer is often the best offer you’ll get.
When you are comfortable that your property is priced close to the price that it will sell for (usually within 10% of your asking price), make sure that your house is in good order for showings. More on this later…
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