Correctly pricing your home is the most crucial step in your marketing plan. If you overprice your home, no amount of other marketing techniques is likely to bring in reasonable purchase offers. Your home is probably your most prized possession, and you may have made a bunch of improvements to make it uniquely yours. You might think it is close to being the perfect house. However, neither real estate agents nor sellers determine the market value. The market is made up of willing and able buyers. Only the market can decide the actual value of houses. You simply will not sell a $550,000 home for $750,000.
When a house comes on the market at a price significantly above market value, it immediately becomes stigmatized. Selling agents know the price is too high for the neighborhood or the size, the number of rooms, the location, or something else. Even in a sellers’ market, selling agents will be reluctant to mention the house to potential buyers and if they do mention it, it will be at the bottom of the recommendation list. In a slow market, it won’t even make the list.
Even if a potential buyer does see your listing, their reaction is likely to be that they don’t want to waste time trying to negotiate down a price that is clearly overpriced. Some potential buyers will be concerned a substantially lower offer will offend the seller and then they will be trying to negotiate with an angry and unreasonable seller. In any case, they simply move on to other listings.
Eventually, overpriced houses have to lower the price to attract buyers. The house becomes stigmatized as "PRICE REDUCTION.” That makes buyers think there is something wrong with the house. Instead of getting more money, what was originally an overpriced house ends up selling for less than market value.
Over the past two years, home prices have been, well… crazy. But that has changed during 2022 and going into 2023. You can no longer price a house above market value and expect next month’s price increase to make it attractive to buyers. There are common reasons that tempt sellers to overprice their homes. As a seller, you should do an attitude check to be sure you aren’t falling into one or more of these overprice attitude traps.
There is an old industry joke about the seller thinking they have a multimillion-dollar mansion, the appraiser valuing it as a middle-class home, and the buyer seeing it as a fixer-upper. In almost all cases the appraiser is going to be the most accurate.
If you want to sell your house quickly, the best strategy is to price it slightly below the current market value. If you have time, one of the best homes in the neighborhood, and are in a strong seller’s market, you might price it slightly above market value but not so high that it scares away potential buyers. Typically, you should have three market valuations done by three agents and pick a price close to the one in the middle.
What else should sellers do to arrive at the correct price? Please leave your comment.