Timing is Everything
Very often a seller asks, “We can always come down in price later…right?”
Historically when your house goes on the market, the greatest potential for buyer traffic is in the first 30-days, and even less time for internet traffic where often times the majority of the traffic online occurs within the first 72-hours of listing to the internet. By pricing it high with the intention of dropping the price later, a home seller will risk completely bypassing the best buyer candidates for their property during the most critical time on market.
Showings Shut Out
Agents have an obligation to do what is best for their clients. Clearly, showing overpriced listings does not fall into those criteria. This is especially true in a low inventory seller’s market where agents will intentionally look for properties listed 3-5% below the prevailing market value and below their buyer’s purchase limits. And since most homes, when appropriately priced, can generate multiple offers and sell above asking within weeks of being listed, buyer’s agents are motivated to search out and show these lower priced homes to their clients quickly so that they do not lose out on an opportunity to purchase.
Benefits the Competition
When a home is over priced, it not only sits on the market but it also acts as a selling point for it’s competition. In comparison to “market priced” homes, buyers that view overpriced listings will know that their is no urgency to place an offer to what they expect to be an unreasonable seller. And, when every other listing in a neighborhood is priced lower or at market value a home buyer will instinctively think, “I can get the same house for less!”
Time on Market
With limited inventory available, buyers understand that they must move quickly to see homes that fit into their budget and price range. This means that the bulk of buyer traffic usually always occurs within the first two weeks of a listing, with the most aggressive buyers willing to pay the highest price for the home being some of the first visitors. But if they do not feel a sense of urgency driving them to make an offer within this time period because the home is overpriced, these buyers will quickly move on to other oppotunities.
Without creating a sense of urgency, over priced homes will linger on the market past the initial two weeks, quickly becoming seen by buyers as a home with unknown issues if it does not sell within this time period. Put yourself in the buyer’s shoes…what are the first two things a buyers asks when they consider making an offer on a property? What’s the likely sales price and how long has it been sitting on the market?
Now, when buyers begin circling back, what do you think their first questions will be to their agents? How low below the list price do we think we can purchase this house for? And, what issues doe we need to look out for since no other buyers made an offer?
Lower Sales Proceeds
Overcoming time on market due to price is one of the most difficult obstacles a home seller can face, since they will not be able to get a second chance to make a great first impression. This often leads to selling below the market value which means ending up with lower sales proceeds. And when you add additional carrying costs, advertising costs and possible repair credits for buyers, most sellers that overprice their home find themselves getting the least from their investment rather than the most.
When it comes to getting the most money for your home, in the shortest amount of time with the least amount of stress, nothing can provide greater results than accurately pricing your home for sale. But determining a good pricing strategy can be tricky for many homeowners…rather than relying on the help of popular automated home valuation models such as Zillow, homeowners should always consult a local real estate agent that is very active in their market place.