Sellers want ‘top dollar’ for their home, and many think their house will sell right away. And when that doesn’t happen, the number one reason is that the house is overpriced.
Here are 6 reasons why overpricing your home is not a good idea.
1. Timing is Everything. Very often a seller thinks, “we can always come down later” because they want to see if they can get their asking price. Generally speaking, the first 14 days a house is on the market is when most active buyers will go see your home. If you are not getting showings, it is very likely because your home is overpriced. Those buyers are looking at other homes, and potentially offering on those houses, not yours.
2. Few Showings. Buyers who have been shopping a neighbourhood get to know prices, and when a listing is overpriced, they don’t want to see it. They may feel the seller is not being reasonable and may not come down to where market value.
3. Benefits the competition. When a home is overpriced, it not only sits on the market, but acts as a selling point for other homes. Buyers can see they can get the same house for less money.
4. Lender trouble. Many lenders require an appraisal of the home to make sure the buyer does not pay too much for a home. If the appraisal comes in high, the buyer may have to come up with additional funds to cover the cost difference. If this happens, the buyer may choose to not waive the financing condition, thereby cancelling the contract.
5. Sitting stigma. Overpriced homes sit on the market. The longer they sit on the market, the greater the stigma that gets associated with the property: why is it not selling, what is wrong with the house, I wonder if someone tried to buy it and why they didn’t go through with it. Many buyers get skittish and may not offer on your house for fear of something wrong with the house. Buyers I work with always want to know how long as the house been on the market.
6. Lower sale price. Many times, when a home sits on the market, and price reductions are done, they end up selling the house for less than they would have if they had simply priced the home properly the first time. This is especially true in a buyer’s market, or when house prices are falling.