Some home-sellers believe it’s a good idea to price high and let people negotiate down – but this guide explains the harm in overpricing your home.
What’s the Harm in Overpricing Your Home?
If you are like many people, you may assume that it’s a good idea to overprice your home and let people negotiate the price down. However, that’s a terrible idea. You and your real estate agent can sit down together and settle on the appropriate asking price for your home – a price that’s neither too high nor too low.
It’s very important that you get the price right the first time. Naturally, if you price your home too low, you’ll be leaving money on the table. And if you price it too high, this is what happens:
- Your home has to compete out of its league
- Qualified buyers may never see it
- You’ll have to lower the price
Here’s a closer look at each.
Problem #1 With Overpricing a Home: Your Home Has to Compete Out of its League
the vast majority of home buyers begin their search online. On nearly every real estate listing website, searchers are able to set price parameters. That means they can look for homes that fit within their budgets. All of the homes that a prospective buyer sees in one of these searches are competing with yours.
The problem is that when you overprice your home, your home is competing with others that are properly priced. Let’s say your real estate agent tells you that your home is worth $450,000. However, you decide to list it for $500,000. When a buyer sees your house alongside all of the others in that $500,000 price range, yours is going to be lacking.
The fact is that real estate agents don’t simply make up prices for homes. Instead, they conduct extensive research to find out what buyers are currently paying for homes similar to yours in the same area. Your agent will look at listings that have recently sold, homes that were on the market and were withdrawn because they didn’t sell, and homes that are currently on the market today. All of the homes your agent looks at will be similar to yours in size, age, amenities and location. combined, all of this information lets your agent know what buyers are currently willing to pay for a home like yours.
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Problem #2 With Overpricing a Home: Qualified Buyers May Never See It
Because most buyers begin their searches online, and because they can set those price parameters, people who could ordinarily afford your home (if it were priced properly) will never see it. You’re cutting out your best chance of selling your home quickly.
Here’s how that works: When a person searches for homes listed between $450,000 and $475,000, but yours is listed for $500,000, it’s not going to show up in the search results. It will only show up when people search for homes listed at $500,000.
Problem #3 With Overpricing a Home: You’ll Have to Lower the Price
Eventually, when your home doesn’t sell, you’ll need to lower the price. Though lowering your home’s sales price may help you sell eventually, there are a couple of problems with a price cut.
The first is that by the time you figure out your home is overpriced, your listing will most likely be “stale.” That happens when other homes are listed after yours; your home’s listing on the Internet gets pushed lower and lower in the search results as newer listings replace it. The second problem is that buyers can see that you have reduced the price of your home. Many will likely wonder what’s wrong with the home and why you couldn’t sell it at its original price.
Related: 7 secrets to selling your home FAST
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