The Dangers of Overpricing Your Home
When we start thinking about selling our homes, it’s natural to imagine selling for a soaring price – after all, it’s the human tendency to overvalue the things we care about, especially if we’ve put any effort into making them what they are. However, when we insist on a price that we feel is right but the market doesn’t support, we run the risk of sabotaging our own sales. To help sober any flights of fancy you might be tempted to take, consider the following facts about pricing.
The law of supply & demand
The driving factor behind any asking price is demand. In a seller’s market, high demand means that buyers are bidding more aggressively for available homes, and sellers can nudge their prices up from what the last comparable homes sold for. In more balanced conditions, there’s less leeway to bump up your asking price – regardless of whether you feel that your home is a diamond in the rough. If the price exceeds demand, your cherished home will only serve to make the competition look better.
Overpriced homes stand out like a sore thumb
If you’re scratching your head wondering why the neighbours around you are selling and you’re not getting any offers, it’s time to reconsider your price. In fact, the most common reason houses don’t sell is that they’re priced too high.
Buyers and their agents are going to do their homework, so they’ll know if your price exceeds other comparable homes in the area and they’ll opt for comparable homes with better price tags. Even if you do generate a little interest, an agent worth his or her salt will advise clients to make “lowball” offers that are more inline with your home’s true market value. If you decide to hold out for a better offer, be prepared for long weeks of uncertainty that could lead to disappointing price reductions or no sale at all.
What you put in doesn’t guarantee what you’ll get out
Over the years, you’ve probably put some work into your home, but your blood, sweat and tears won’t necessarily turn into dollar signs when it comes time to sell. Of course, certain renovations will increase your home’s value, like new windows, a new kitchen, or a new roof. However, even in these cases, you’ll almost never get a 100% return on your investment because a home is sold as a package deal, not as a collection of individually priced upgrades charged to the buyer.
Trust the market data
The best way to understand your home’s market value is to have a comparative market analysis (CMA) done by a real estate agent who has been inside your home and knows your neighbourhood. Free online assessments can only take an agent so far – they might account for your lot size, square footage and price history, but they’re not specific enough to pin your hopes on. On the other hand, a CMA, like the ones prepared by Purplebricks agents, will give you a detailed report on how your home and property features measure up against comparable homes in your area that are for sale, that have recently sold, or that were listed and didn’t sell. The data in the CMA will help you see your home’s value objectively and point to any emerging trends in buyer demand.
Of course, there’s always a chance that your CMA might not give you the price you had in mind, and you might be tempted to shop around for an agent until you find one who says he or she can get it for you. Beware such promises: all too often they end up dramatically reducing prices after only a couple of weeks on the market.
The importance of being priced correctly from the outset of your sale simply can’t be emphasised enough: newly listed homes generate the most interest, and the longer a home sits on the market, the more stigmatized it becomes. Though your home might be rich with memories and love, and though you might have crunched the numbers on your investment into it, in the end, its dollar value is determined by the market.