When selling your home pricing it properly is 80% of marketing the home. Overpricing your home has consequences. No amount of advertising, open houses or money will sell an overpriced home.
Take a Hyundai Elantra and park it next to a Mercedes SL500. On thesurface they both have a steering wheel, 4 tires a windshield and they are roughly the same size, yet there are two very different price tags. You will never get a car buyer to pay the $110,000 price tag the Mercedes has for the Elantra which is valued around $14,000.
Same thing is true for houses. You will not sell a $550,000 for $700,000. Buyers are not naive and they are more empowered than ever with access to information about real estate on the internet.
Reasons Why Sellers Over Price Their Homes
For many your home is your priced possession. It is probably the biggest investment you have ever made and the emotions run high and can cloud your judgement when it comes time to price your home properly. Emotions can lead to overpricing your home. Of course every home seller wants to believe their home is worth more and will find any means to justify a higher price.
- Over improvement- The seller has spent too much money personalizing their house to their taste. When it comes time to sell they want to recoup every dollar they spent. I always recommend talk to your REALTOR before spending any money on renovations so you have a clear picture of how it will effect the value. Few renovations will recoup dollar for dollar on resale.
- Need More Money for Your Next Move– Needing more money for your next move has no impact on what your house is worth. Your home will sell for what it will sell for, period. Trying to get extra to cover real estate commissions, closing cost, movers etc… will just lead to disappointment.
- Being uneducated about the real estate marketplace- A home seller will listen to everyone who has an opinion about the price of their house…. their neighbor, their dad, their barber, etc… But at the end of the day it is all about the data. What have similar home sold for in the immediate area?
- Leave Bargaining Room– Some home sellers believe that leaving plenty of bargaining room allows them to negotiate a better price. There is nothing further from the truth. We will cover why this is wrong later in the article.
- Zillow Zestimate- The Zillow Zestimate says your home is worth more. There is probably no bigger misconception about the Zillow Zestimate being accurate in the real estate industry.
This Is What Happens When You Insist On Overpricing Your Home
Your listing hits the market. There may be a little bit of interest in the beginning. Maybe a few showings or maybe none. Realistically, a typical home should be at a bare minimum receiving 2-4 showings a week if not more.
You will be excited for open houses because people actually show up. But guess what, people always show up it does not mean they are qualified it just means they are nosy.
As the weeks go by showings become spotty if non-existent.
You will become irritated with your agent. You want more open houses, you want ads in the New York Times, you want TV advertising… but guess what your house is being rejected on a daily basis by home buyers on the internet. Buyers don’t look in newspapers anymore. If a buyer is interested they call and schedule a showing based upon what they see on the internet about your home. It is that simple.
Now you are approaching 90 days on the market. Your house should never sit on the market that long, unsold with out a change in price, condition or marketing. But you still think you have a Mercedes when you really own a Chevy Malibu.
Eventually your house expires on the market unsold. You are angry and frustrated at your agent, the real estate market the buyers. At the end of the day, it is your house. It is your responsibility to learn about the local market to determine the right price on your home.
There is nothing more disastrous than not selling your home. All your hopes and plans have to be put on hold until you
regroup and figure out what to do next. Never mind the time and energy you put into listing your home and frustration levels running high when the buyers aren’t coming or putting in offers.
Well Ok, My Home is Overpriced But They Can Just Put in an Offer
Your still defending your pricing decision. I spent 100k on a deck, my kitchen remodel was 70k 15 years ago…. ok you will probably never going to recoup 100k on a deck and if you remodeled your kitchen 15 years ago its on its way to be outdated now.
But, your starting to think maybe your overpriced your home a little, you tell the agent well the buyers can just put in an offer.
Yet the offers never come. First off, if you are moderately to seriously overpriced your home is not even being viewed by the true buyers of your home. Your house is being viewed by buyers that have more money to spend and your house does not stand up to the competition in that price range. It is probably not even on the radar screen of the true buyers for your home.
A buyer looking for a 550-600k home stops their home search at 600k they aren’t even looking at homes to 700k or even 650k.
Massachusetts Real estate statistics show most homes that are sold sell for with in 1% to 3% of the asking price. Buyers and buyers agents are not going to waste time looking in a price range that home buyers cannot afford.
So even if you insisted on overpricing your home. Buyers will be very hesitant to put in an offer on your home. As a listing agent, most buyers are coming through the house with their buyers agent. The listing agent will have very little control over the buyers as well as the seller has very little control over the buyer. As a home seller learn what you can control and what you can’t.
Buyers Are Not Putting In Offers for Several Reasons on Your Overpriced Home
Even if you do get some home buyers that are potential buyers for your home this is why they wont put in offers.
- Home Buyers are embarrassed to put in an offer well below asking and they do not want to insult you. You chose the listing price so they believe you believe it is worth that much. They don’t even want to bother trying.
- Home buyers run on emotion. They do not want to get “emotionally involved” in a process they think will not have a good outcome for them.
- As stated before your house isn’t even being marketed to the right buyers. Take that 550k home price it at 700k and guess what it just is lacking compared to the competition. You are trying to sell your home to people who can afford 700k but your house is lacking compared to the other offerings in that price range.
- It gets to the point where your hit the critical point somewhere around 90 days. It all depends on your market. But you have now surpassed the average days on market. You have market rot!! Whats market rot? Literally the house is perceived as rotting on the market by buyers. Buyers have a pack mentality they want what other buyers want. Now they think something is wrong because no one else wants your house.
The Downside of overpricing Your Home
There are many downsides to overpricing your home. Lets cover a few here.
- Your home expires on the market unsold. This hurts especially if you need to be somewhere else.
- Inconvenience. Selling your home can be a lot of work and inconvenient. Months of showing and keeping your house in tip top showing condition can become tiresome.
- Frustration. There is nothing more frustrating than not selling your home. It is not unusual to be all cocky in the beginning than as time goes by you get more and more frustrated. You’ll be frustrated with the buyers, you will be frustrated with your agent. But at the end of the day, you picked the price.
- Your home wont appraise. Maybe you were lucky and received an offer you go through all the steps to find out the buyers lender won’t loan the money for the home. The appraisal came in under the accepted offer. Your home not appraising can be one of the worse things that can happen. You will be well into the closing process before you find out. YOu will have most likely secured another place to live, hired mover etc…. all to have it most likely fall apart.
- Net Less. Once buyers get the sense your home is overpriced and has been sitting on the market, some buyers will put in offers below market preying on your frustration.
Let me re-iterate. overpricing your home will net you less. The chart below is data I pulled for Tewksbury MA. 277 single family homes sold in the past year. Here is the relationship of how many days it took to get an offer in relationship to the median selling price versus the percentage it sold for in relationship to the original list price.
|Day to Offer||Median Sale Price||Sale price to Original List Price|
There is definitely a correlation to how overpricing your home can effect not just your sale price but the time your house spends on the market
. If you are looking for top dollar on your home it is critical to sell your home the first 45-60 days.
How Do You Avoid overpricing Your Home?
Price you home at market based on comparable properties that have sold. Sit down with your real estate agent and review past sales of homes in the area with similar:
- Location- Obviously you want you comparable home to be in the same town. More importantly you want to try and get comps either in the same neighborhood or within 1 mile of your location. The banks look closely at this on appraisals.
- Square footage- The comps should be no more than 20%- 25% larger or smaller. Meaning if you have a 2000 sq foot home comparable properties should be no more than 1500-2500 square feet. Again a huge criteria the bank looks at when it come time for an appraisal.
- When the house sold. Comparables need to be no more than 3-6 months old. The homes you are using need to have sold in that time period. Key word sold. Not listed or expired…. what did someone actually pay for a home. Again this is another big criteria for the banks on appraisals.
- Room, bedroom and bath count- Ideally the comparables should have the same bedroom, bath and room count or at least very close.
- Style- You should try and compare colonials to colonials capes to capes and ranches to ranches etc… There are certain expectations and features that go along with a style. Here in New England a colonial usually performs best price wise. I did a quick review of styles in Andover Massachusetts, which had a good mix of home styles. I compared homes that were from 1500-2500 sq feet. Colonials had an average sale price of $538k, capes were at $515,000 and ranches were at $499,000.
- Age- Age is a little different depending on renovations. But it is hard to take a 1900 colonial and compare it to a 2005 colonial in the same size range. But there are some older home that have been completely renovated to function like a newer home and you must pay attention to that.
- Condition- Condition can play a huge factor maybe your neighbor has the same home as you but they spent 100k in updating a kitchen and 3 baths with-in the past year while yours are still from the 60’s. Buyers will pay for a similar home that needs no updating.
- Features and Amenities- Features and amenities like Master suite with a master bath, central air, patios, decks, finished basements, etc… can play a role in what your house is worth.
This is a rough guideline for using comparable homes used with the first 3 items being the biggies. Obviously homes can be unique, some more than others. Your agent should have a good handle on all what goes into pricing your home for your area. They should be able to explain pricing concept and the local real estate market to you.
The banks have strict guidelines for location, square footage and age of the comparable homes. If an appraiser goes outside of the guidelines they need to have a very good explanation. So should your agent.
Pricing your home properly for the current real estate conditions is the most critical component of selling your home. It is a decision that should not be taken lightly and as a homeowner you should take the time to understand how and why an agent is recommending a price on your home. Statistically the quicker you sell your home the more money you will get on the sale of your home.
Overpricing your home is going to cause you to be very frustrated. In addition, it most likely will net you less money in the end. Getting the price right on your home from the get go, makes for a much smoother transaction. The sooner you realize your home is competing for buyers attention, the better off you will be.
The worst thing that happens is you invested time and money into preparing your home and keeping it in tip top showing condition. Only to than have it expire on the market unsold. On top of that you had plans to be somewhere else.
Remember, every house is saleable for the right price, in any market. Hire a REALTOR with a good reputation. Avoid using the REALTOR that gives you the highest price with out backing it up with valid data.
Other resources on overpricing your home:
- Wendy Weir- Selling a Home in 2016
- Karen Highland- Pricing Your Home Right from the Start.
- Xavier De Buck- 10 Tell Tale Signs A Home Is Over Priced
Overpricing Your Home- and The Disastrous Effects It Can Have, was written by Kevin Vitali of EXIT Group One Real Estate. Kevin has a strong marketing plan that will get your house sold. Want to discuss your upcoming move call Kevin at 978-360-0422.
Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford