The Pitfalls of Overpricing Your Home

SOURCE: Windermere

When a homeowner prepares to put their house up for sale, two things are usually top of mind: how long will it take to sell and how much can we get for it. During a seller’s market, when stories of bidding wars and cash offers abound, it’s can be tempting to put as high a price tag on your home as possible. But even when the market favors sellers, overpricing your home can jeopardize your efforts to sell quickly and get top dollar.

Missing Your Market

The vast majority of homebuyers start their search online, and the first criteria they often enter is the price range. If your home is above the high point of their range, buyers in your target market will never even see your listing—it simply won’t show up in their searches. In addition, it’s human nature to go after the top item in a collection. Buyers want the most house they can get within their budget. This means you want to be the best house compared to those in your price range, rather than among the bottom compared to those in a more expensive bracket.

Key takeaway: You want to shine against your competition, not pale by comparison

Playing the Numbers

Selling a home is a numbers game: the more potential buyers, the greater chance of an offer. Overpriced homes get fewer showings, both in person and online. Your agent will tell you that showings are critical to capturing the interest of buyers, but if the home is overpriced, they will have difficulty attracting attention to your home. This can slow the entire home selling process, leaving both you and your agent feeling frustrated.

Key takeaway: More showings = more offers.

Going Stale

It’s also human nature to be drawn to what’s new, the bright, shiny object, as the saying goes. New listings attract the most attention—that’s when buyer interest is highest. The longer your home is on the market, the less appealing it becomes. And at a certain point, you may be forced to lower the price. Many buyers and their agents will assume the reason the house has been on the market so long, and why you had to lower the price, is because there is something wrong with it. Once the price drops begin, they can continue, which creates the risk of selling your home for less than what it is worth.
In addition, the longer your home is on the market, the more expenses you incur. Mortgage payments, utilities costs, and seller’s fees will continue to pile up, making it harder to recover from these costs when your home does eventually sell.

Key takeaway: Be the bright, shiny object.

Losing at the Last Minute

Let’s say you do find a buyer at the overpriced cost. During closing, the lender will order an appraisal of your home. If the appraiser finds that the market value of the home is less than the selling price, they could deny financing. If that happens and you are forced to put the house back on the market, buyers’ agents will be able to see that it’s a relisting, could assume something is wrong with the house and share those concerns with their client.

Key takeaway: Be realistic about value.

SOURCE: Windermere