Pricing Matters – Overpricing, even in a seller’s market can cost you money and time.
Everyone has different views and opinions, and often times an owner’s view and pricing expectation are somewhat more biased than what the market will actually bare. The definition of market value is “the most likely price a buyer will pay if a property is exposed to the market a reasonable amount of time.” In regards to overpricing, based on historical data, the odds are a home will sell for what it was supposed to sell for initially or sell for less.
Another mistake sellers make is adding up what they paid, and what they put into a house. Buyers do not care what the owner’s investment is. A saying often used in the appraisal world is “Cost does not equal market.” What home buyers are willing to pay, as well as bank/investors are willing to loan is dependent on current value.
This can be confusing at times, because appraisers do not set the market, buyers set the market. But most buyers still have to get a mortgage.
A good agent will not want to take a listing that is grossly overpriced. They will tell the seller straight forward, and demonstrate the market with statistics and analysis. Be leery of the agents who “tell you what you want to hear”. I call this “buying your listing:” Some agents do this for a couple of reasons; number one reason is using your house to pick up buyer leads, the other reason is they have to use this strategy to beat out the good agent, who knows the market and really wants to sell your home. The home will typically sell only after they have lowered the price to the “market value”.
You will also discover that you miss a good percentage of the buyers because the price just plain turned them off. Many buyers simply won’t look at a home if the price is unrealistic. What happens is the listing sits and sits on the market. After a reasonable marketing time, buyers begin to wonder, “What is wrong with this house? There must be a reason no one wants it.” A seller will end up having to lower price less than what they could have initially received in the first place.
Even if you get lucky, which is possible in a seller’s market, you have the concern of the appraisal coming in short. If the buyer is getting a loan, the bank will order an appraisal for collateral. The appraisal comes up short of the price, three weeks later, and you run the risk of the deal falling apart.
A seller is best advised to find a good real estate agent with professional credentials, and listen to his or her advice for pricing their home. I will advise you that it is better to list a little lower, and encourage a bidding war, than risk all of the problems that listing too high brings.