Why Sellers Overprice Their Homes
There's one piece of advice that every real estate agent on earth will tell you - "If you overprice your home, it will take longer to sell and sell for less money."
Yet, sellers ignore them, and overprice their homes anyway, hoping their home will be the one to defy market physics. Why do they do it? Lots of reasons:
1. They feel entitled to make a profit
2. They don't want to bring money to closing
3. They feel their home is superior to other similar homes
4. They want a return on improvements and repairs
5. They want to buy a bigger, more expensive home
6. They want to pay off credit card and student loan debts
7. They want to pay for college, retirement or some other financial goal
8. They think buyers want to negotiate
9. They think real estate agents can get it sold for more if they just work harder
Did you notice that not a single one of those reasons has anything to do with the current market value of the home?
According to an older study from real estate community Zillow.com, 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 typically, homes beat inflation by one or two points, but the market doesn't always cooperate. Buyers may not like the improvements you made to your home. Your home may have been in a trendy neighborhood when you purchased it, but now buyers are flocking somewhere else.
If you overprice, your home is going to stagnate on the market. The right buyer for your home might not know your home exists if they use price perimeters to search for a home. That means a typical search between $175,000 and $200,000 won't include your home priced at $205,000.
Buyers tend to search in increments depending on scale - $10,000 increments for $100,000 homes and $100,000 increments for million-dollar homes. Pricing just over a logical range end point like at $255,000 or $505,000 will exclude that home from some search results, say experts.
Setting a high price with wiggle room to reduce the price later is not a successful strategy. 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 reduce the price, buyers tend to think there's something wrong with the house, sending potential offers even lower.
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 good buy.