Benefits of overpricing your home in today’s market
…For you as the seller? None.
But there is a potential benefit derived from an overpriced listing to your listing broker.
Calls from the sign to the broker often connect the listing agent to buyers seeking a better value – somewhere else. An over-priced listing especially on a busy road is a ‘reader board advertisement’ for any listing agent, advertising their presence to the passing public.
But the seller isn’t told “Hey, sorry your house hasn’t sold in a year, but I was just paid for the second time from a contract I wrote for buyers I met from your overpriced listing.”
But there are two sides to this: a) Every real estate sign says ‘Call Me’. Most of us have had the opportunity to represent buyers we’ve meet at our listings who purchase another home. And, b) More often, this doesn’t happen, and the poor listing broker puts out a lot of time and money during their good faith effort to market an overpriced home for months.
How do you determine The Right Price in this still-declining market and avoid overpricing? Here’s the second secret in this especially challenging market: We professionals don’t know exactly the price in the equation.
“What do we need you for?!”
The realistic answer is that you need us to give good advice for the proper price ‘range’ from the outset, to work beside you to analyze the ever-changing data, and to present your home in the best light through staging and professional photography.
And the tough one: You also need us to advise you that we overshot the mark and how much of a price drop is needed to get ahead of the falling curve.
“But our home has been shown 18 times to prospective buyers, so there’s a lot of interest!”
That’s like saying you’ve had 18 coffee dates without an invitation to dine; that’s Rejection.
Eighteen buyers said “not this one” because of better values in your price range. Drop the price to a different price point (not wimpy $2,000 or $5,000 reductions), and hopefully you’ll attract a different set of buyers who will see your house as the best one in their range, a requirement to capture the few qualified buyers out there.
What sellers have been slow to recognize is that your home has three competitors:
1. Bank Owned Properties (REO listing from banks’ unemotional ‘clear it off our list now” low pricing)
2. Short Sales (sellers who have mortgage debt greater than current market value and don’t care how low the price drops)
3. Sellers with enough equity who aggressively price their homes to sell, fully accepting current market conditions.
When discussing nearby SOLDs, seller sometimes say, “But that one was a short sale…” like it mattered in appraising their home.
A SOLD is a SOLD and outside of condition, the reason a nearby similar house sold for ‘so little’ has no bearing. If it’s comparable, that sale price will be what the appraiser uses to evaluate your contract price.
However, you may secure a contract on a home only to have the buyer’s lender’s appraisal come in lower than that contracted price. The sellers’ final option ends up to be lowering the contract sale price.
Too bad you didn’t analyze those same comparable SOLDs and lower it to get more competition and a quicker sale.
The partnership between a listing agent and their sellers should be under girded with telling the harsh truth of ‘estimate’ of value, (even if it costs getting the listing): “This is what I believe it will sell for” seasoned with “but I’ve been wrong before”.
A broker might have a willingness to try a slightly higher price for an agreed upon short period of time with agreed upon time periods for steady reductions in pricing until you reach ‘the sweet spot.’
When hiring a listing broker you should demand honesty with realism. Don’t hire the one who tickled your ear with promises of more money.
An experienced broker can give you an expected range and then – in this market –give you a very worst expectation below that!
Combined with advice to make your home sparkle, and you’ll have a hope to sell in a relatively short amount of time for your best return.
It’s a buyers’ market and will be for quite some time. Buyers should expect to get a great value.
Buyers’ first questions used to be “Why are they selling?’ Now it’s, “How long has it been on the market?” Many days on market equates to proportionately lower offers.Releasing higher expectations in exchange for moving on can bring breathtaking relief.