When it’s time to sell your home, pricing your home competitively is one of the most important things to get right from the beginning. We all know that prices rose dramatically in the first half of the last decade, then came crashing down after 2007. Given that, it can be difficult for a seller to reconcile the amount they probably paid with the amount buyers are willing to pay today. Pricing your home right from the start is crucial, no matter what kind of market a seller deals with.
Time On Market
The temptation is to overprice your home and make decreases in price as you go along. Many sellers believe they must have “negotiating room”. Unfortunately, you probably won’t realize the list price is too high until much later, after you lose valuable time on the market. This chart shows a basic truth about the number of showings with time on the market:
After that initial buzz, the number of views drops significantly. After a price reduction, seller’s will often see another, smaller bump in traffic. You can see that the first 30 days is important to attract the right buyers to the home.
When you first list your home for sale, the more you overprice, the fewer buyers will come to see it. Combine fewer showings with optimal showing time, and you can see how a seller can miss out on the best marketing time by overpricing their home from the start.
Pricing Your Home Right From the Start
Here are just six of the disappointments you’ll find with an overpriced house:
- A buyers’ response to your ad will probably be slow, since they most likely recognize overpricing. Remember, people buy by comparing like homes, and if they are working with a buyer’s agent, the agent is giving them recent statistics.
- Buyers who are interested may be the wrong ones because they’re looking for a home priced the same as yours – but with MORE features. You’ll be missing the buyers who could and/or would buy your house.
- Your overpriced home will help buyers make a decision on other homes that are priced fairly. You’ll be the homeowner that sells your neighbor’s home.
- Very few buyers will even make an offer on an overpriced home. Even in a seller’s market like we see today [low inventory with healthy demand] buyer’s are sensitive to over paying.
- After your house has been on the market for several months, buyers will notice the number of days on market and may assume there is something wrong with your house. After a house becomes “stale” in the psychology of buyers’ thinking, the seller will most likely end up lowering the price to a point less than they could have gotten if they’d priced the home correctly when first listed. This is called chasing the market down.
- If you do find a buyer at your price, the appraisal still has to work; the house has to appraise for the contracted price, or the mortgage lender will not lend the money to the buyer. The contract will have to be re-negotiated to make the deal work.
What can you do to solve the pricing issue? Work with an experienced real estate agent who knows the market in your neighborhood. Your agent will provide you with a valuable CMA based on what similar homes have sold for in the recent 3 to 6 months, depending on the dynamics in your market. Take advantage of the research and advice your real estate agent can offer, and you’ll be sure to avoid the pitfalls of an overpriced home.
While it’s true that finding the right listing price is not entirely a science, knowing the right target range is the aim. Pricing the home within a range close to the market value for comparable homes will be a great strategy. The seller will most likely meet the two goals of 1. getting the right buyers in the door, and 2. taking advantage of the optimal listing time.
Contact The Highland Group for a CMA of your Maryland home.