Why Correct Home Pricing Matters
Most home sellers aim for two objectives: 1) to get the best possible price and 2) to sell their property as quickly as possible. When setting a price, people sometimes mistakenly overprice with the thought of “testing” the market. Unfortunately, this strategy often fails.
Reasons Homeowners Overprice Their Homes
Homeowners often perceive their homes as being worth more than they truly are in the current market. Top reasons they may overprice include:
- Struggling to look beyond emotional attachment to their homes.
- Wanting to recoup the money invested in home improvements (not realizing some investments don’t increase the property’s value; some renovations may even diminish it).
- Listing at a higher price because they need the money to pay for their next home.
Coming to terms with the current market is the best strategy because accurate pricing is more likely to attract buyers.
Damaging Effects of Overpricing a Home
Overpricing a home can cause it to languish on the market for several reasons. For starters, buyers’ agents will spot an overpriced home a mile away and are likely to steer their clients away from a property. Here are other problems that could arise.
- Price falls outside of the search parameters of the buyers likely to buy the home.
- People looking at similarly priced homes will pass over the listing since others (larger or otherwise worth more) are accurately priced.
- Buyers tend to bypass homes sitting on the market for too long since they assume there is a reason the listing is stale (e.g. something is wrong with the home).
- Overpriced homes tend to have appraisal issues—even if a buyer is willing to pay, their mortgage lender may not approve for amounts that aren’t comparable to similar listings.
Ultimately, in the end, most homeowners who overvalue and don’t have a good plan in place end up selling at market value—or worse—end up having to drop the price below its original market value to eventually get the property sold.
How you price your home matters. If you undervalue it too much, you may not get full market value. Yet, overpricing can make it incredibly difficult to sell your home. Bottom line, buyers who initially price their homes based on fair market prices have better success selling and getting the amount of money they want.