Home Sellers: Avoid Overpricing At All Costs

Asyou prepare to sell your home, you should be aware of costly do’s anddon’ts that should be observed as the house goes on the market. However, with the possible exception of painting your home’s exterior abright shade of hot pink, the most significant mistake you are likelyto make involves overpricing.

Sellingyour home can be an emotionally-charged chapter in your life, whichmakes it all too easy to get caught up in the moment. Let’s face it – we are all biased when it comes to our homes. After all, our home conveys a special meaning to us that is uniqueamong all of our possessions. Thus, we tend to hold onto a biasednotion that our home ranks heads and tails above others of similardesign, size and location, and, thus, deserves a “special” price tagwhen we part with it for good.

But, make no mistake aboutit. This notion could cost you greatly – in terms of time andmoney. And as hard as it may be to shake the conception that yourhome should easily fetch a price well above what the competition isseeking, you will have to do just that.

Force yourself to look at your home objectively, exactly as the buyer would. Also, enlist the aid of your Realtor to help you study the competitionand the marketplace (current, as well as recent past. Try tolearn why some houses sold in a matter of days, while others languishedon the market for months on end.

You will probably find thatmany of those homes, which took forever and a day to sell, were mostlikely overpriced to begin with. Take note of this, and learnfrom those sellers’ mistakes. According to manyRealtors, the best opportunity to sell your home comes within thirtydays of its first appearance on the market. If a home isoverpriced, most buyers entering the marketplace will bypass it. Thus, the prime opportunity for the seller vanishes quickly.

Other key reasons why overpricing of your home is a no-win situation:

Value– buyers will sidestep your home if they feel it is priced well abovecomparable homes in the area. Why pay for a house that isoverpriced, if they can purchase a much nicer home for the same amountof money elsewhere? Also, many buyers who may be on theborderline, as far as qualifying financially for a home comparable toyours, will likely be intimidated and just assume the home is out oftheir price range.
Time factor – if your home isoverpriced, it will most likely have to sit and wait it out until allthe comparable homes in the area have been sold, since that’s where thehome buyers will be flocking. Problem is – new homes similar toyours, but more in tune with normal market prices -- will continue toenter the market in the meantime. In this situation, thecompetition wins while you play a waiting game that may never end.
Stalefactor – many potential buyers will notice when a home has lingered onthe market for an unusually long time. They will often assumesomething is abnormal about the house, and will stay away from this“stale” property. Oftentimes, the utterly frustrated seller willend up trying to unload his property at a below-market price. Thus, he’s lost the opportunity to make a decent profit, while alsolosing time during the lengthy selling period -- a time frame in whichhe could’ve been investing that profit, or enjoying his new home.
Financingdifficulty – if a buyer (from another world, perhaps) who is willing topay the unrealistic price you’ve set is actually found, he or she willhave to obtain financing from a bank or mortgage company. In thatcase, however, the lender will require an appraisal. Unfortunately, the home would, in all likelihood, be appraised for alower amount than the seller’s price, resulting in a mortgage loandenial.
Emotional/mental strain – The fact that you willneed to continue to keep your home in spotless condition for showingswhile it’s on the market can take its toll on you emotionally,mentally, and, even financially. After all, it takes time toclean and maintain a home in “showroom condition.” And, as the sayinggoes, time is money.

It’s wise to remember that, afterinterviewing a few different real estate agents, it’s not a good ideato go with the one who recommends setting a price that is well abovethe market. That should tell you this he or she is either notreally in touch with local market conditions – perhaps he or she is newto the area, and is used to working in another market where prices runhigher.

Remember, as a guideline, many Realtors suggest thathome sellers should not price their homes above 5% of the marketaverage for similar homes in the area. However, even that 5%threshold may be too high depending on the local marketconditions. A good Realtor should be able to advise you whenmarket factors warrant slightly raising the price above the average.