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The Disadvantages of Overpricing Your Home
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When I have pricing discussions with people interested in listing their home for sale, I use recently sold comparable properties (comps) to determine a suggested price range. The comps indicate the current market and give a good idea of the possible current appraised values of homes similar in size, style, condition, and location.
Sellers sometimes have different ideas regarding pricing and are sometimes disappointed with the ranges I present. Occasionally sellers will insist on overpricing their home despite the proof of market conditions I provide during my listing presentation. They'll want to price it higher "just to see if we can get the price we want right away," then promise to consider pricing it lower in a few weeks if they don't get any offers.
If they do find a buyer interested in the home, the buyer's agent will most likely perform a market analysis for his or her buyers, and will probably use the same comps I used to arrive at the price the sellers felt was "too low" before overpricing their home for the current market.
The worst part of this scenario? The longer the home is on the market, the more attached the sellers are to their high price. In their minds, they have already spent the proceeds of the sale in a hundred different ways. "Once we sell this one, we'll be able to upgrade to our dream home." "When we sell we'll be able to afford a pool for our next home." "After we close we can afford to take that vacation in Hawaii." "As soon as we sell this one we can pay off our credit cards and still afford a nice new home."
After a few weeks I have to make the phone call I dread and ask the sellers to consider dropping the price in order to get some new showings and hopefully an offer. Unfortunately, to the sellers a price reduction means they'll no longer be able to afford their dream home, there won't be enough money for Hawaii, and they won't be able to pay off all the credit cards.
Finally, they grudgingly agree to a price reduction. By this time the sellers are chasing the market. The perfect buyer may have already passed their home over since it was originally priced outside their (more realistic) target range. Worse, the home may now be priced correctly but it's been on the market for months. Buyers imagine there must be something wrong with the house and won't consider seeing it at all. After all, nobody else wanted it.
The only way to avoid chasing the market is to price the home correctly the first time and adjust accordingly if necessary.
For most people, a home is one of the largest purchases they will ever make. My clients hire me to make the process of buying or selling their home go as smoothly as possible. At the end of the tran....
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