Tempting as it may seem, jacking up the listing price of your home to leave room for negotiations is a dangerous risk that a lot of sellers regret taking.If you are really serious about selling your home, it is best to take pricing seriously by listing your home at its fair market value. Otherwise, you may end up sabotaging your chances on a good deal.
Here are the top 6 reasons why you shouldn't be in the business of overpricing your home:
1. The peak value of your home is at the exact moment it hits the market.
The first two weeks after your house is listed on the MLS are the most important, since this is when your home is going to generate a lot of activity. If you price your home too high, many buyers will overlook it since it would instantly be out of their range. With no offers on the table, your property will stay on the market for too long--leaving the next batch of buyers worried that something may be wrong with it.
You may also want to be wary of inexperienced listing agents who promise an unrealistically high asking price for your home. Experienced and trustworthy agents know that this is an unethical practice that will cost the seller a lot of time and money, since the home will eventually need a price drop after sitting on the market unnoticed for way too long.
When your house loses its “freshness” without seeing any offers, its value will drop even lower than the price you should have given it in the first place.
2. You are less likely to create a “bidding war.”
A competitively priced home will attract a lot of potential buyers, and is most likely to receive multiple offers in its first two weeks. This creates a bidding war that ultimately drives up the value of your home. On the other hand, an overpriced home won't generate a lot of competition. Worse, it may not get any offers!
3. Even if you lower the price later on, buyers are still unlikely to reconsider.
In this market, most buyers won’t wait around for a house that they’ve already marked as out of their price range. Once they cross you out of their list, buyers will immediately move on to look at other houses they can actually afford.
In the event that a buyer really falls in love with your house, he or she will most likely wait for it to sit on the market long enough for you to accept a lowball offer. However, it is unlikely for them to make any kind of offer while your house still has that unreasonably hefty price tag. Also, a lot of buyers may have already found another house by the time you reduce your price to fair market value.
4. You’ll end up turning off a lot of potential buyers.
In this market, almost no one can pull off selling an overpriced home. Today’s buyers have 24/7 access to information via the internet, and are highly aware of market values. More often than not, they know when a house is grossly overpriced, and it reflects poorly on you (the seller) no matter what.
Even if the decision to list the home at such a high price is simply a miscalculation due to a lack of experience and research (and not because the seller is actually trying to get away with selling at the highest price possible), buyers wouldn’t want to deal with a seller who isn’t responsible enough to come up with a fair market price.
5. You might get in trouble with your appraisal.
If you do get that higher offer for your home, chances are the offer will be contingent on appraisal. If you priced it way beyond its appraised value based on comps in your area, you could get yourself into an appraisal problem. When this happens, you may be forced to lower down your price anyway or lose the deal altogether.
6. Your home may get an invisible warning sign.
If your home sits on the market for too long, neighbors and potential buyers will assume that there is a problem with it. The home will be stigmatized, and buyers will either be too turned off or too afraid to check it out.
No one wants to buy a house that nobody else seems to want. A house that sticks on the market for months often generate suspicions that some undisclosed feature or element is making it unsalable.
7. You might lose even more money while your overpriced home stays on the market.
By continuing to pay for the monthly expenses of your home while the selling period stretches on, any profit you may get from selling it at a higher price could simply offset your Principal, Interest, Taxes, and Insurance (PITI) expenses. If you’ve already moved, you might even have to pay for two mortgages for a long time, or maintain the property through another season.
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Counseling Session Activities
- Prepare the buyer for executing a buyer representation agreement
- Explain agency relationships to the buyer and get state required legal consent to represent, if needed
- Inform the buyer of working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
Building a Relationship
- Learn the buyer’s wants and non-negotiable needs
- Understand the buyer’s budget and what will be needed financially
- Help the buyer understand what property their chosen budget will buy
- Consider having the buyer fill out a homebuyer’s checklist
- Assist the buyer in examining how much they can afford to spend
- Provide quality lender resources
- Partner with the buyer to locate suitable properties for consideration
- Match the buyer’s needs with available property
- Constantly re-evaluate buyer’s needs and refocus property showings to fit those needs
- After ensuring the buyer understands what is done for them, how it is done,and the benefit to them, obtain signatures on the buyer representation agreement
- Explain how compensation is paid, who pays it, and what the buyer’s options are for paying it
Educating the Buyer
- Communicate the working relationship based on state law, the REALTORS® Code of Ethics, and the broker’s business policies
- Explain Federal and State Fair Housing laws
- Explain what to look for in applicable property disclosures
- Reassure the buyer that their personal information will remain confidential
- Inform the buyer that you will always disclose all known material defects
- In accordance with state law, provide information on checking the sex-offender registry and crime statistics for the neighborhood
- Discuss available resources that the buyer can check to learn more about prospective neighborhoods
Preparing the Buyer
- Explain the timeline for house hunting, mortgage approval, and closing
- Explain the local market and how it impacts the buyer
- Show statistics on what percentage of list price sellers in the area are currentlyreceiving
- Inform the buyer on what home features are popular
- Identify current average days on market
- Share the dangers of using the price per square foot to figure home values
- Explain the concept of absorption rate and how it impacts the buying process
- Indicate current listing months of market inventory
- Share estimated potential out-of-pocket costs to complete the transaction
- Assist the buyer in analyzing the loan estimates
- Qualify the buyer for financial ability to purchase
- Help the buyer account for the complete costs of homeownership
- Prepare lender for listing agent calls
- Assist in comparing different financing options
- Help the buyer select for viewing only those homes that fit their needs
- Proceed in showing homes that fit the buyer’s must-haves
- Caution the buyer on posting information to social media
- Review the sample sales contract so the buyer is prepared when it comes time to make an offer
Showing Properties
- Schedule showings and provide access to all listed properties as soon as they become available in their local MLS broker marketplaces
- Educate the buyer on the immediacy of new listings appearing in their local MLS broker marketplaces and the lag time for them to appear on some websites
- Collaborate with the buyer on properties they may have learned about through their sphere contacts
- Research and assist on all unlisted properties the buyer wishes to see
- Preview properties prior to showing if needed
- Network with other agents to source properties not yet in their local MLS broker marketplaces
- Contact homeowners in focus areas to see if they are considering selling
- Set up an automated email alert system through their local MLS broker marketplaces that immediately notifies the buyer of properties that fit discussed requirements
- Arrange a tour of areas, schools, and key points of interest
- Provide resources containing neighborhood information on municipal services,schools, etc.
- Inform the buyer of negative aspects like nearby venues or operations that may result in issues that could impact value
- Collect and share any other vital information on available homes, remembering to follow all fair housing laws at all times
- Check applicable zoning and building restrictions
- Help the buyer decipher public property and tax information
- Collect and share pertinent data on values, taxes, utility costs, etc.
- Compare each property shown to the buyer’s wants and needs list and remind them of what they were looking for
- Help the buyer narrow the search until the buyer identifies top choices
Negotiating Offers
- Assist the buyer in getting the best property at the best price
- Suggest that the buyer learn more about the neighborhood prior to makingan offer
- Prepare a comparative market analysis (CMA) in advance of making an offer
- Prepare the buyer to have the most attractive offer in the current marketplace
- Explain common contract contingencies and include approved protective clauses in the purchase offer
- Ensure that the buyer receives and understands all state and federally-required disclosure forms
- Prioritize contract negotiation goals with the buyer
- Help create a negotiating strategy
- Use strategies such as an escalation clause to maintain a competitive offer
- Prepare the buyer for a multiple offer situation and develop negotiation strategies
- Write an offer that has a reasonable chance of being accepted
- Recommend optional contingencies and explain the pros and cons of using them
- Provide information on purchasing incentives that may be available
- Discuss financing alternatives
- Negotiate the buyer’s offers to arrive at the best price and terms
- Utilize hyperlocal expertise and strong communication skills to assist the buyer in being the successful offer
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