Maximize profits! Getting the most out of the sale of a property is what every owner wants. So naturally, listing your home or farm for an inflated number seems like a great place to start – right? Wrong.
Don’t fall into the trap of feeling you have to price your property at a high price just to get a better sale price.
There are any number of reasons property owners get sucked into this way of thinking. Some feel they have designed and built the perfect home, failing to realize their tastes may not match those of a prospective buyer.
Others are emotionally invested in a home because of the years spent there. And some just flat out get stuck on wanting to make a designated amount of money on the sale of a property, no-matter what.
These are all bad reasons to overprice a property.
Pitfalls Of Pricing A Property Too High
But what’s the harm in trying, you ask? There are several detrimental aspects to overpricing a property.
- Appraisal / Lending Issues – Let’s say you have listed your home for $500,000 despite the fact the market indicators and comparable sales in the area show it should be priced at $450,000. You somehow manage to find a buyer willing to pay your asking price; however, the sale still falls through. Why? Often banks can’t finance a property when the sale price far exceeds the market value without additional cash being brought to table to make up the difference.
- Better Deal Down the Street – Again, you’ve priced your home for $500,000 and a block over, your neighbor is listed for $450,000 for virtually the same house. Sure, there are a few differences, but in the buyer’s eyes, they can get the same house in the same area for $50,000 less.
- Buyer Blacklisted – In today’s market, buyers are savvy. They are more educated on the market than ever before. When buyers and buyer’s agents come across a property that is drastically overpriced, it will get bypassed and never considered, even if a price reduction comes further down the road.
- Timing is Key – In a competitive real estate market, things move fast. When a property is priced within market guidelines it can sell very quickly. The first 30 days of a listing are the most critical. The longer a property sits on the market, the more buyers begin to wonder, “What’s wrong with this place? Why hasn’t it sold yet?”
How to Avoid These Common Pitfalls
There are a couple of things to keep in mind that will help you stay away from making the costly mistakes.
- Trust the Comps – When comparable sales for your area are giving you a price range to stay within… trust them. This will be the primary measure stick your property will be up against when buyers evaluate your property’s price. You want to shine against your competition, not make your competition look better by appearing to be a better value.
- Don’t Be Emotionally Attached – This is your home and you have a lot of memories around every corner. This place is special to you. But remember, it isn’t special to the buyer (not yet). They don’t see the memories or hear the stories. They see you have a nice home and it is worth something within the market range, nothing more.
- Make Adjustments – When you enter the market and there is little to no positive feedback in the first couple of weeks, don’t hesitate to make adjustments. It is crucial to react to the market information early on in the process. The first 30-60 days are critical. Once you get beyond that window, buyers will begin to wonder what’s wrong.
There are times when you can get away with pushing the envelope on the listing price, but these opportunities are rare and need to be handled with caution and care.
Overall, the single biggest influence you have when listing real estate is to be mindful how you are pricing your property. Consider all of the market factors and consult an experienced real estate agent to help you make the best decision for you and your family.