Q: Why are sellers still over-pricing their homes?
-Wilma Flint, Chicago
A: One of the first and most wellknown real estate mantras a real estate agent will tell a seller is, “If you overprice your home, it will take longer to sell and sell for less money.” Yet, sellers continue this self-defeating practice, hoping their personal needs will defy market physics. Some feel entitled to make a profit and others want to allow room for negotiations. 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 a new report from real estate community Zillow.com, when sellers bought a home has a lot to do with how much they overprice their Sellers need to study their local markets before pricing their homes for sale. In a buyer’s market, overpricing tends to make properties stagnate. Agents and buyers will use an overpriced home as an unfavorable comparable. Even worse, the right buyer might not know about the home at all if they and their agents use price perimeters to search for a home.
Setting a high price with wiggle room to reduce the price later is not a successful strategy. During the past year, U.S. home sellers slashed more than $24 billion in potential wealth from home listings. On average, most sellers will reduce their list price after 79 days on the market, choosing to cut their original list price by 8 percent. Following a first reduction, 35 percent of these sellers will make a second. That’s 2.6 months on the market without a contract, which may cause some buyers to wonder if there’s something wrong with the house, sending potential offers even lower.
While it’s difficult to quantify how much money is lost due to overpricing, by asking this question you’re already taking steps in the right direction. Your realtor will pull comps (listings of comparable homes) and cross reference them with your home. They will also use their knowledge and experience to differentiate between communities, and explain to you how this differentiation affects home values. After all, they are canvassing real estate the value will always be determined by what a buyer is willing to pay. And what a buyer is willing to pay can be determined by the comps that your Realtor has just pulled for you. It is important to understand improving your home will add some value, but it certainly won’t equate to the amount you spent getting it there.
Sellers who bought before 2002 tend to overprice by 11.6% and those who bought between 2002 and 2006 overpriced their homes by 9.3%.
And lastly, I will touch on the emotional element of selling your home. It can be very difficult for a seller to see the sale of their home as a business transaction, and why shouldn’t it be? It is called a home for a reason. But as a result of this emotional attachment, sellers have a tendency to over value their home. One of the biggest challenges for a seller can be to look at their house objectively. This is just another reason as to why having a Realtor by your side is very important. If you are considering selling your home contact one of our Happy Herald Real Estate Professionals; they have the real estate experience, knowledge, professionalism, and enthusiasm. It’s no wonder that positive attitudes create positive results.