Sellers: Don't set your listing price too high
Leonard Steinberg, "Chief Evangelist" for Compass, just sent this out to us:
The Price Is Wrong!
Yesterday I was speaking to a potential seller who asked me what I thought about a selling price her agent had proposed. It was quite a bit lower than the asking prices some neighbors had placed on their homes recently. She tried to convince me how WRONG this price was, how much money she had put into her home to upgrade and renovate it, the new stairway, the bathrooms, the addition of another bedroom suite, etc.
I listened closely, and then I asked her if any of her neighbors homes had sold. They hadn't. The one or two that had sold took many months to sell, experienced price-cuts and then sold at rather large discounts. The bottom line is that in a buyer's market with lots of competing properties, if you are not priced extremely attractively - at a point where several buyers fear they may lose out on getting your property if they don't act without hesitation - chances are buyers will 'wait and see' and keep looking, or wait till you drop your price.
The dream with a "WRONG" price is that more than one buyer feels the price is simply too low - or wrong - and multiple bids emerge.
In light of Leonard's story, and in anticipation of the spring market, we thought it apt to refresh and repost our blog advising sellers not to set their home's price too high. Enjoy!
When you're ready to sell your home, you want to make the most money possible, right? The key to getting your home sold fast and for a great price is to find just the right price: not too high, and not too low. If the property is listed accurately, you could create a buying frenzy and receive multiple offers on your home. You might even have a bidding war, which is a great situation to be in!
However, if the price is too high, you are at extreme risk of actually losing money. How, you might ask? Read on to see why we at Liz & Ellie Real Estate pay so much attention to finding the right listing price for your property.
Selling your home is a financial transaction, though it often feels like an emotional one. If you have wonderful memories associated with your home, you may think it's more valuable than the market does. So go ahead and appreciate your home; then put those feelings aside and use your brain, not your heart, to choose the right price.
Buyer perception matters. A lot.
If the asking price is too high, your house will sit on the market, eventually forcing you to reduce the price. The reduction can make buyers think there’s something wrong with the house itself, when in reality it was just the price.
Also, don’t base your listing price on how much you originally paid, or how much you still owe on your mortgage. Buyers aren’t going to care about either of these things. They just want the best price possible in the current market.
Renovations do matter, but not as much as you'd hope.
Know that you won’t necessarily get back all the money you may have put into a renovation. Again, buyers don’t care how much you spent; they care about getting the best price. So don’t do a high-end renovation just in hopes of getting a higher sale price.
Buyers do their research online, using price parameters.
If your home is overpriced, it will get narrowed out of online searches. When people are searching for potential homes, they type in a price range. If yours is too high, then you’re missing out on all those buyers who might actually be able to afford your home.
Your home is not exactly the same as your neighbor's.
Don’t base your price only on what your neighbors got for their home. Yes, the neighborhood is important. But the layout, condition, number of bathrooms, living space, yard, parking and much more factor into finding the best listing price for your home. So get a CMA (Comparative Market Analysis) from us, then use it as just part of the formula for your perfect price.
If your sale price is too high, there are major consequences.
1. If it sits on the market for more than a couple of weeks (in this market), you’ll almost certainly get less money than you would have if the starting price had been lower.
2. You’ll have to keep your house “show-ready” for all that time it’s sitting there. Want to do that for more than 6 months? Only a true neatnik would want that. The rest of us aren't going to be happy about putting every scrap of laundry away immediately, mopping the floors daily, and vacating the house at the merest whisper of a showing.
3. You might be making mortgage payments on a home you don’t want to live in anymore.
4. It may lead to big hurdles with a buyer's lender if the home is listed too high. Say you get an offer at that high price, but the appraisal comes in at a lower price. The lender may actually refuse to finance your home at the higher offer price. The buyer's could walk away without penalty, and all of a sudden, you’ve gone right back to the beginning of the selling process.
Pricing your home to sell, and to sell fast, is vital. Avoid these pitfalls for the best possible return on your investment. Contact us if you're thinking of selling, or if you have any questions. We're here to help!