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The seven deadly sins of overpricing

By Trulia | Published: Oct 14, 2009 | 18 Comments

"We can always go down, but we can't go up."

If you're selling your home this statement has probably crossed your lips at least once. But when it comes to setting a pricing strategy for your home, is it a good idea to start high and work your way down, especially in a market flooded with inventory? Probably not, as most experts would advise that the best way to increase your odds of a successful sale is to price your home at fair market value. But, as logical as this advice sounds, for many sellers it is still tempting to tack a few percentage points onto the price to "leave room to negotiate". To avoid this temptation, let's take a look at the seven deadly sins of overpricing:

  1. Appraisal problems

    Even if you do find a buyer willing to pay an inflated price, the fact is over 90% of buyers use some kind of financing to pay for their home purchase. If your home won't appraise for the purchase price the sale will likely fail.

  2. No showings

    Today's sophisticated home buyers are well educated about the real estate market. If your home is overpriced they won't bother looking at it, let alone make you an offer.

  3. Branding problems

    When a new listing hits the market, every agent quickly checks the property out to see if it's a good fit for their clients. If your home is branded as "overpriced", reigniting interest may take drastic measures.

  4. Selling the competition

    Overpricing helps your competition. How? You make their lower prices seem like bargains. Nothing is worse than watching your neighbors put up a sold sign.

  5. Stagnation

    The longer your home sits on the market, the more likely it is to become stigmatized or stale. Have you ever seen a property that seems to be perpetually for sale? Do you ever wonder - What's wrong with that house?

  6. Tougher negotiations

    Buyers who do view your home may negotiate harder because the home has been on the market for a longer period of time and because it is overpriced compared to the competition.

  7. Lost opportunities

    You will lose a percentage of buyers who are outside of your price point. These are buyers who are looking in the price range that the home will eventually sell for but don't see the home because the price is above their pre-set budget.

One popular myth is that a great marketing plan will overcome a pricing problem. Nope - spending a zillion dollars on advertising, internet ads, and television spots won't motivate buyers to pay you more than the home is worth. Another myth is the assumption that a buyer will see your home, fall in love, and write you a check so the competition doesn't matter. Wrong. Buyers don't look at homes in isolation. Most look at 10-15 homes before making a buying decision. Because of this, setting a competitive price relative to the competition is an essential component to a successful marketing strategy.

Comments

By Voices Member,  Tue Jan 5 2010, 07:29
Pricing is an art. Price too high and you sit. Sitting is deadly. In the end, you lose money. Is it FAIR? No, but that is how it works. Your best opportunity to sell is right when you hit the market. The most buyers come through in the first 30 days.Once your house has been on the market more than 60 days, you are highly unlikely to get asking price. In today's Buyers' Market, buyers are determined Not to Pay List Price. It is maddening! My boss once drew a pyramid to illustrate how to price correctly. She drew a horizontal line through the pyramid right near the top to make the point that the perfect price is not at the very top...but slightly below the top. For an attractive, move-in ready house in a popular neighborhood, that pricing strategy creates bidding wars! Even In Today's Market!!!
By Mini Samuel,  Wed Jan 13 2010, 06:35
What a great article!
By Ron Lessard (603) 438-9460,  Wed Apr 7 2010, 03:33
Pricing your home correctly is critical. A knowledgeable and experienced Realtor will not not only guide you in pricing your home, but will also constantly monitor the market and assess pricing of directly competing homes in the same price band.

While home prices for sellers are not what they were one or two years ago, know that the home you are buying is also at a price less than it was. If you are going to a larger home, it is possible to actually benefit from the market shift.
By Fran Rokicki,  Thu Sep 16 2010, 15:21
Price it right and have it in good condition. The buyers today, expect good maintenance and updates. Keep good records of your maintenance and this will, also, help to sell your home. Some Sellers assume that the buyer can change it, if they want to. No, they expect to walk into your home, with everything updated, freshly painted and ready to go.
By Clare Michael,  Tue Nov 9 2010, 12:09
If you look at home selling from an energy point of view, the first 30 days is absolutely critical. That's when the interest is highest and therefore the opportunity is greatest. Remeber what happens when a new attractive family moves to small town and becomes the buzz. After a short time, they are just the Joneses.
By Belinda Spillman,  Fri Feb 25 2011, 10:28
Great article. I constantly battle with sellers about price. They wonder why they have no showings and yet they won't lower the price of their home to what the market will bear. It is frustrating for all involved.
By Heather Kight,  Fri Apr 8 2011, 11:54
Please continue to post pricing articles! The information is invaluable when working with sellers and it is great to be able to direct them to Trulia for additional information about the importance of "pricing right" at the beginning of a listing.
By David Fredlake,  Wed Aug 24 2011, 13:03
Pricing is all about balancing what's been recently sold vs. what's on the market. "What's been sold" tells you if it will appraise and "what's on the market" tells you about your competition. We also look for "price gaps" where there's little or no competition...works everytime.
By Carmen Brodeur- Top 1% Realtor,  Mon Oct 3 2011, 13:20
Appraisals will often kill an overpriced deal. Even if you find a buyer willing to pay your inflated price, the bank won't lend for a higher than market value.
By Karen Gately Herrick,  Sat Jan 28 2012, 16:40
Fantastic article!!!
By Steve Woodruff,  Thu Feb 9 2012, 11:46
Excellent!

Pricing a property in today’s market isn’t much different from playing ice hockey. Let’s take some sound advice from the Hall of Fame hockey player Wayne Gretzky.

“I always skate to where the puck is going to be, not where it is.”
By G.I. LAWRIE LAWRENCE, Realtor,  Wed Mar 21 2012, 06:48
Great article, it seem to be something Real Estate agents deal with all the time. Being able to find that balance between where you know the home needs to be priced and where the seller believes their home should be priced.
By Rikknikk_2,  Wed Apr 24 2013, 13:41
Some great facts here that many don't think about.
By Derek Colen,  Wed May 22 2013, 07:24
Pricing your home right in this market is very key to maximizing your homes value. If you price too low you may leave money on the table. If you price too high, you will scare off potential buyers and will not get the optimal amount for your home. If you price it just right, you will not only get multiple offers but it will drive the price up to its maximum value. This is the sweet spot and in order to hit this value you need to price your home effectively!!
By Robert Guth,  Fri Jul 5 2013, 19:55
Pricing too high is just a waste of time. I have a partner that I buy, renovate, and sell homes with. We listed a home at $289,000 because of his insistence. I knew he was wrong. It sold for $242,000. $3,000 less than I said it would, 4 months earlier. We paid insurance, electricity, and water, plus maintenance while it sat on the market. People know when its priced too high. I had wanted to list at $249,000, willing to sell for $240,000. He just wasted our time, and I kick myself for not being just as aggressive in insisting I was right. The problem he has, is the longer we work on it, the more pride he takes, and the price just goes up in his head. Not so with buyers.
By Ray Whitby *480 259-7697,  Fri Nov 15 2013, 21:06
Pricing a home is absolutely critical, and really it is THE most important job of the listing agent right out of the gate in the process of selling a home. A very great obstacle that will pose the most harm if not contained is the "greedy sellers" syndrome, and let's face it,,,, everyone that has ever been in the sellers shoes will desire the "fat" offer and we all want to get the most we can.The professionalism and amount of trust the sellers have in the agent/broker they choose is what makes the difference. I've seen too many listing agents acquiesce to the sellers demands at a price because of the sellers research online and sales history nearby... This usually turns out bad and not only does the listing agent NOT do a good job for his clients, but if the agent is not replaced, the statistics are very high that the seller nets much less when the home finally sells, than they would have had the home been listed correctly in the first place. Pricing correctly gives the seller the maximum possibility to get the best price for many reasons and the most important is possible multiple offers to create "friendly" bidding price increases. In the end, it's pricing where the market will be, and ultimately what the home is worth is what people are willing to pay. It's almost always less the longer the property sits.
By Elizabeth Sagarminaga,  Sun Dec 22 2013, 09:43
If you really wish to sell your property, you need to know about pricing. This is the single most crucial factor in affecting a sale. All other things being equal, this would be a deal breaker. Once your house sits on the market for a while, it gets tainted in the eyes of a prospective buyer. He searches for reasons due to which the property has remained unsold. It becomes a vicious cycle. In the end, the bargaining power shifts from you to the buyer. Do not therefore be unrealistic or greedy about the asking price.
By Connie Morelle,  Mon Mar 24 2014, 13:18
In pricing, we evaluate statistical, supportable data, and give consideration to the guidelines used by appraisers and underwriters...after all, they have the final say! This approach consistently generates multiple offers for our sellers, which means a stronger negotiating position, a higher price, and fewer days on market.

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