Face Facts. Overpricing your home is BAD. Worse, in fact, than a rough case of the chicken pox. There are dozens of reasons overpricing is bad but a few stand out from the pack in terms of hitting your wallet when everything is said and done.
Overpricing your home makes the competition LOOK better.
When you price your home over the market value by even 5% or 10%, it makes other properties that are comparable to yours look better. Take for instance, Bob’s house. Bob has a nice 2,000 square foot, 4 bed, 2 1/2 bath home in Bentonville that is well maintained and sits in a subdivision with some 100-odd other homes that are somewhat similar in stature and value. The market value of the home as determine by a professional real estate agent is $105 dollars per square foot (that’s $210,000 for the numerically challenged). Against his Realtors advice, Bob lists his property at $115 dollars per heated square foot ($230,000). Now, Ronald has a very similar property just down the street in the same subdivision. It has the same amenities, a similar floor plan, and is the same size. The only real difference is that Ronald’s house has pretty poor landscaping and the backyard is not fenced like Bob’s. Ronald lists his home the same day for $98 per heated square foot, coming out to $196,000. To get the landscaping up to par and install a new fence costs about $12,000, bringing the total price up to $208,000. Bob’s home may be better kept and have more going for it but by overpricing the house, Bob has caused buyers to go look at and make offers on Ronald’s house instead. Poor Bob.
Overpricing your home destroys your ‘Window of Opportunity’.
To the right is a graph of two homes’ showings. The yellow is of Ronald’s home, the red, Bob’s. As you can see, Bob never had a chance. The window of opportunity exists for this reason. When you place your home on the market, buyers are already out there looking. These buyer find your home through a Realtor or on a website and decide to go see it or not. These first few weeks of buyers are the ones already in the market. As time passes, only new buyers look at a home that has been on the market a while. When your home is overpriced, you completely miss this initial influx of buyers. Even if you realize your mistake by week 3 or 4 the damage is done. Buyers don’t go back and look at houses they’ve already been show is overpriced either online or by a Realtor. There is a stigma on the overpriced home even though it is now priced at market value. Good luck to Bob, he’s gonna need it.
Overpricing automatically halves your number of showings.
A home that doesn’t show doesn’t sell. Even at market value, due to locational, school, and misc. preferences, only 6 out of every 10 buyers that are looking at your price range will come see your home for sale. When you overprice your property by just 10%, your number of showings will drop in half. Now, only 3 out of every 10 buyers will come to see your property. The average property shows at least 8 times before there is an offer. By overpricing your home by 10% you have effectively doubled your home’s time on the market if it sells at all. Just to put it all together for you, Bob ended up selling his home a year later for $204,000. $6,000 under original market value and over twice the days on market. Plus, he had to offer buyer and Realtor incentives just to get the house sold. Again, poor Bob.
I don’t give out this information to scare or intimidate sellers into lowering their prices. I do it to illustrate the fact that by overpricing your home you are hurting yourself and your family in the long run. If you only remember one thing about pricing your home, remember this:
Sellers do not determine a home’s value. Realtors do not determine a home’s value. Buyers determine the market value of any given property.
The market in Northwest Arkansas is constantly changing. If you are wondering what your home is worth today, whether you’re selling soon or you just want to know, please contact me for a free pricing analysis of your property. As someone on an ’80’s kid’s cartoon once said, “Knowing is half the battle.”