There is a key point of advice that most Real Estate Agents will tell you – “If you overprice your home, it will take longer to sell and sell for less money.”
However, sellers refuse to listen, and overprice their homes anyway, hoping their home will be the one to defy market physics. Why do they do it? There are lots of reasons:
They feel like they have to make a profit
They don’t want to bring money to closing
They feel their home is better than other similar homes
They want a return on repairs they have made and improvements
They want to buy a more expensive, larger home
They want to be able to pay off loans and debts
They want to pay for some type of financial goal like retirement or college
They think buyers want to negotiate
They think real estate agents are capable of selling it if they put a lot of work in
Did you notice that not a single one of those reasons has anything to do with the current market value of the home?
An older study from Zillow.com stated, sellers often base their asking prices on their original purchase price. In other words, they want to live in the home for a number of years, and then sell it for more than they paid for it so they can meet personal financial goals, such as buying a bigger home or putting more toward retirement.
That’s understandable, considering that normally, homes beat inflation by one or two points, but the market doesn’t always cooperate. Buyers may not agree with the improvements you made to your home. Your home may have been trendy when you bought it, but now the trends might have changed and buyers are looking for something different.
If you overprice, your home is going to stagnate on the market. The buyer that is looking for your home wont even know it is there if your price isn’t in their searching price range. That means a typical search between $175,000 and $200,000 won’t include your home priced at $205,000.
Some think that setting the price high so you can come down is a good strategy, however, that is incorrect. You might get some showings, but you won’t get offers. Your home could sit without an offer for a month or two before you take action to reduce the price. Once you come around to reducing the price buyers wonder why it has been on the market for so long thinking something is wrong. This leads to an even lower price.
Instead, price your home just under break points. $249,000 instead of $255,000. Since you’re already expecting to negotiate, a lower price point might get you a full-price offer from a buyer who recognizes that your home is a great buy.