Why not Overprice?
Next to choosing the right Realtor, pricing your home is the most important decision you will make when selling your home. As we all know, there are some huge disadvantages to under pricing, but there are equally disastrous results in over pricing your home for sale. Many homeowners have lost valuable time and money by overpricing when putting their houses on the market for sale. We have outlined below some of the largest problems homeowners run into because of overpricing.
Time on the Market Increases
Houses that are priced outside of the current market range for their neighbourhood take longer to sell. The longer a home sits on the market, the less valuable it becomes to prospective homebuyers. Clients that are actively looking for a home simply do not get overly excited about a house that has been sitting on the market for long periods of time. History shows that the longer a home has been on the market, the greater the tendency for buyers to offer low on the property. A National study has shown that the sale price for a house decreases proportionately with the time that the property has been on the market.
Usually it is during the first few weeks after a property has been listed that the most showings occur. If a property is overpriced based on the current market value for your neighbourhood, the buyers that would be most interested in your home will not even see the property because it is simply outside their price range. Similarly, buyers shopping in the higher price range will have little interest in it because there will be other properties that are larger or have more features that have been priced according to current market situations. Even if you eventually decide to lower your price, the initial excitement that is created when a new property hits the market will have been lost and it will be very difficult for you or your Realtor to re-start the momentum that has been lost. When you price your home within the current market range, your home has the greatest number of opportunities to be shown to the greatest number of interested, qualified buyers. This serves to create for you, the seller, the greatest potential for a competitively priced sale.
As you probably are aware from your own past experience, the average buyer will look at many homes before deciding to purchase the one that is right for them. Having looked at many homes, it is unlikely that the buyer and their Realtor, will not realize when a home is priced too high for the current market situation. Even if your home has all the amenities and features that the buyer wants, that buyer will be unlikely to offer on a property that is priced well over market value. Many buyers will not offer low on a property for two reasons. First, they may not want to offend the seller by offering too low below list price and second, they may not want to get involved in a lengthy negotiation with a seller that seems unreasonable about the house price.
If you should be lucky enough to find a buyer that is willing to pay above market value for your property, you may face problems that occur after the sale has been negotiated. In order for a buyer to qualify for financing (a mortgage), most banks will require an appraisal on the property before they agree to fund the mortgage. Unless the buyer is paying 100% cash this may be a huge problem since the appraisal that is done by the bank must indicate to the bank that the home has been purchased at current market values. If this is not the case, the buyer may not get their mortgage and thus the deal may collapse, leaving you with your home back on the market. It is absolutely essential that the homeowner, in conjunction with their Realtor, study the current market and price the property accordingly so that the house will sell in the most convenient amount of time possible and for the maximum amount of value.