When Your Selling Price is too High, Beware!

Although we back up our price recommendations with recent sales data of similar homes, lets say you remain convinced your house is worth more. An unscrupulous agent may promise you a higher sales price, and suddenly you are a happy and excited home seller, already counting the money.

This is an agent who seems willing to listen to your input and work with you. This is an agent that cares about putting the most money in your pocket. This is an agent that is willing to start out at your price and if you need to drop the price later, you can do that easily, right? After all, everyone else does it!

Wrong.  The Agent’s intention from the beginning is to eventually talk you into lowering the price.

If you start out with too high a price on your home, you may have just added to your stress level, and selling a home is stressful enough. There will be a lot of "behind the scenes" action taking place that you don’t know about.

Contrary to popular opinion, the listing agent does not usually attempt to sell your home to a homebuyer. That isn’t very efficient. Listing agents market and promote your home to the hordes of other local agents who do work with homebuyers, dramatically increasing your personal sales force. During the first couple of weeks your home should be a flurry of activity with buyer’s agents coming to preview your home so they can sell it to their clients, if the price is right.

If you and your agent have overpriced, fewer agents will preview your home. After all, they are Real Estate Professionals, and it is their job to know local market conditions and home values. If your house is dramatically above market, why waste time? Their time is better spent previewing homes that are priced realistically.

Dropping Your Price...Too Late

Old News:  Later, when you drop your price, your house is "old news." You will never be able to recapture that flurry of initial activity you would have had with a realistic price. Your house could take longer to sell.

Home won’t Appraise:  Even if you do successfully sell at an above market price, your buyer will need a mortgage. The mortgage lender requires an appraisal. If comparable sales for the last six months and current market conditions do not support your sales price, the house won’t appraise. Your deal falls apart. Of course, you can always attempt to renegotiate the price, but only if the buyer is willing to listen. Your house could go "back on the market."

Once your home has fallen out of escrow or sits on the market awhile, it is harder to get a good offer. Potential buyers will think you might be getting desperate, so they will make lower offers. By overpricing your home in the beginning, you could actually end up settling for a lower price than you would have normally received.

Five Signs your home is overpriced

1. Your home is priced well above neighboring properties . The first thing brokers do before they recommend a price to a seller, is they look at the sales prices of the last three sales of comparable-sized homes in the your neighborhood. You can conduct your own research to determine a reasonable price before you hear estimates from brokers. Do a quick search online to see what neighborhood homes are selling for, and there are some tools that can help determine a roundabout value of your home based on your zip code and other factors.

2. After a couple months, you still haven't received an offer . Don't panic just yet. This isn't true for all homes, (it's not uncommon for high high-end homes, for example, to stay on the market for years) but there should be a flurry of showings and interest in the first four to six weeks the home is on the market if it's priced properly. Although one assumes that overeager buyers are indicative that the price is low, realtors say competitive bids are more likely indicative of a reasonably priced home.

3. You spoke to several realtors before you hired the one who recommended the highest price for your home . Realtors seldom want to take a property that is overpriced, simply for the fact that the chances of selling it are slim, and that means their chances of making a commission are greatly reduced. Common sense is that you should speak with several realtors before choosing one to represent you, but if you consistently hear a ballpark price that seems low to you, the price may be right. Realtors are (or should be) intimately familiar with most real estate activities in their market, and they should have the best idea of how a home should be priced.

4. There aren't any scheduled showings . Immediately after the home hits the market, there should be at least a few appointments for showings. If there aren't, it might indicate that local brokers think the home is overpriced and therefore aren't showing it to their clients. Realtors suggest that after a month, if there is very limited interest in the home, it's not too late to reduce the price, but it's important to act quick in order to sustain some interest.

5. The home is priced for expensive, unique amenities that may not hold broad appeal . Your family may have enjoyed endless hours of fun in your indoor badminton court, but not everyone loves badminton as much as your family does. The more customized the home's amenities, the less likely the seller is to see their value in the sales price.