Choosing a price for your property can be one of the more difficult decisions you make as a seller. There’s a lot to consider. It’s important to note that pricing is both an art and a science, and can depend on MANY factors. Check out the post linked here about choosing a price for your property for more general details.
Disclaimer – Real estate is always a financial investment, and selling is your time to maximize the profits on that investment. This should go without saying, but in an article like this, it needs to be said. As your agent, I want you to get top dollar too, because Realtors in our area are payed based on a percentage of final sale price, so, it is to our benefit to get you the highest price. None of the information here is intended to coerce you into undervaluing your property, but rather to inform you that overpriced properties can dramatically affect your bottom line, inadvertently.
It is very common for sellers to want to try overpricing their property slightly, to see how the market responds. The idea is that you try out the higher price, in hopes of getting a good offer early on. We have seen this strategy work! We have also seen it fail miserably… The honest truth is that it is a RISK/REWARD situation.
The REWARD aspect is pretty clear cut. If you price high and get a buyer immediately, then you’ve got a win!
However, when properties are overpriced, they run the RISK of becoming a stale listing. Here’s what can happen.
1 – The buyers who would be interested in your property are priced out of it. They never see the listing, or see it and decide that while it conforms to what they are looking for, it’s priced dramatically higher than the other properties they’ve been viewing. Also, in a market like we’re in right now, buyers are weary… they’re often putting in offers on many properties and are getting rejected, so if something is too far out of their price range, they might not even look at it, or even if they do look at it and like it, they may decide that with competing offers, they wouldn’t stand a chance.
2 – Local agents fail to show the property to their clients because they see that it’s overpriced or out of their price range. If Realtors do show the property, they become less excited about selling it to their buyers because it does not represent a good value for their buyer’s financial investment. It SHOULD be up to buyers to decide what they do and do not like, but many buyers really rely on their Realtor’s judgement, or sometimes even expect their Realtor to introduce them to the properties that are available, so if a Realtor feels that your property is overpriced, it may fall off their radar, and consequently, their buyers may never know about your listing.
3 – As a seller, at this point, you may recognize that your listing isn’t getting enough showing activity or offers. You decide now is a good time to lower the price. This can have a positive effect by exposing new buyers to the property since it may now be in their price range. However, by this point, the property may have gotten a subtle reputation that it’s not a good value, or that you, as a seller, may have unreasonable expectations that aren’t worth dealing with. Sometimes buyers (and even experienced agents) inaccurately perceive that the property hasn’t sold because there’s “something wrong with it.”
4 – In this situation, the property could be considered stale. The length of time it may take to get to this point, or the length of time it may stay “stale” depends entirely on what the market is doing at that time. After it’s been on the market for a few months, most active buyers have seen it, and often it seems that no amount of marketing or exposure will change their first impression of the property. Remember, buyers make a decision about a property within seconds.
In a seller’s market, like we’re seeing in 2021, this entire situation is admittedly uncommon. Properties priced too high do seem to adjust relatively quickly, but it’s good to be aware that properties that are dramatically overpriced still run the risk of meeting this fate. Just because the market is rising quickly, and buyers are here for it, doesn’t mean that buyers aren’t still savvy people. Buyers in 2021 know they are paying top dollar, offering to purchase properties at values that are often unprecedented locally and are typically still looking for good value. Lastly, properties that are price appropriately are more likely to get multiple offers, and over asking offers. For more information on that, check out the Pricing article linked in the intro!