Everyone wants to get the best value from their property. As a Realtor®, it can be tempting to price a client’s home more highly than you believe the market warrants. The pressure from the client can be a strong factor, and of course your own income and reputation improves when you can gain higher prices for homes.
Unfortunately, overpricing properties can lead to a lot of issues for both you and your clients. Here are some of the biggest dangers of overpricing a property.
Lost Time and Value
As you likely know, the higher you price a property, the longer it will take to sell. Regrettably, in many markets today that lost time translates to lost value. Imagine setting a home price at $400,000 in a market where similar homes are going for $350,000. After six months, the house doesn’t sell and the owners are willing to reduce the price. Only now the homes in the market are going for $325,000. By overpricing and losing time, you’ve also lost value.
If you don’t understand the local market, or allow a homeowner to pressure you into pricing their house to high, you will lose time and money for both yourself and your customer.
Stress and Cost to the Homeowner
If a house is priced at the market peak, it must be shown in top-notch condition every time a potential buyer visits. Even for the cleanest clients, keeping a home that clean and organized over time is stressful. If a house is cluttered or dirty, there’s no chance of getting an over-market price for it. In addition, since a higher-than-market priced home takes longer to sell, the homeowners will have that strain for a long period of time.
The homeowner is also suffering significant costs while the home stays on the market. Each month the homeowner has to pay another mortgage payment, which is money they won’t get back. As the costs for your client mount, their patience with you is going to decrease. In the worst case, they may change to another Realtor®.
Decreased Interest in the Property
As time passes, a property becomes less interesting to buyers. People see a house that has sat on the market for weeks or months, and they wonder what’s wrong with it. In addition, if they are interested, they are likely to significantly low-ball their offer, knowing that the house hasn’t moved.
If you convince your client to lower the price on the home, even to an appropriate level, you may do damage to the attention buyers are willing to pay to the property. A house that has sat unsold for a number of weeks and then drops the prices looks like a problem property. The only way to avoid this perception is to appropriately price the house at the beginning.
Issues with Appraisal
Even if you are able to sell the home above the market, the appraisal could cause you issues and even scuttle the deal. In order for the buyer to get financing approved, they have to get an appraiser to assess the property. The bank uses that information to approve the appropriate mortgage for the home. If the home is priced above its actual value, you may have delays with the sale or even have the financing completely fall through.
Knowing how to deal with a low appraisal on a home is part of the job for every Realtor®. However, you can avoid the issue many times by simply pricing the house correctly for the market.
As you can see, it’s not in your interest or in the interest of your client for you to price a home above what the market will bear. As a professional Realtor®, you should gain the skills you need to not only properly assess a neighborhood market, but to deal with difficult clients who are looking for a high price.
If you choose to list higher than you should to win a listing, you’ll quickly earn a bad reputation with clients and other Realtors®, which will hurt your business. The only course of action for a professional, high-quality Realtor® is to understand the market and price all properties appropriately.
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