Most sellers are not real estate experts and rely on professional advice when it comes to selling their home. Some decide to forego the professional advice and sell privately. Which ever way it happens, some homes end up on the market priced above the market value and overpricing real estate is not a good idea.
Sellers seem to overprice their property either unknowingly or they are simply testing the market. Before I became a Realtor, my husband and I were trying to test the market too. We were told by professionals that the price of our home was too high, but we didn't want to listen. Here are some of the reasons why you should not overprice your home if you are the seller and watch out for overpriced properties if you are a buyer.
Dangers for the Sellers:
- You will miss many qualified prospective buyers that would consider purchasing your property had it been in the right price range. The buyers your house is attracting right now might realize that the property is overpriced and that they can get something better in that price range.
- Your home will stay on the market for longer period of time and the longer it stays on the market the more people will think there is something wrong with it. Your house will not look attractive anymore. Remember, it's a human psychology to want what other people want.
- Your overpriced property will actually help sell other houses in the area. Other houses will seem like bargains.
- The longer your house stays on the market, the more you might have to lower the price. Many properties that start out overpriced, end up selling BELOW market value in the end.
- Even if you find a buyer for your property, the bank might not approve the mortgage if the bank appraisal shows that the property is overpriced.
Dangers for the Buyers:
- Even if you are pre approved for mortgage loan but the house doesn't approve as a result of appraisal, you won't be able to secure that mortgage loan. If you are buying privately and your Agreement of Purchase and Sale does not have appropriate clauses inserted into it, you might find yourself in financial pickle being bound by a contract to purchase but without all the funds available to complete the transaction. Always make sure you're check with your lawyer before signing any contracts if you're buying privately.
- If you buy a property that has been overpriced and decide to sell it some time later, you might find that you won't get any return on your investment. You might even end up losing the money. One of my colleagues is currently working with a client that purchased an overpriced property a while ago and due to certain circumstances has to sell now. The client stands to lose over $30,000 as a result of this! Always make sure your agent prepares a Comparative Market Analysis Report for the property you're planning to put an offer on.
For most people their home is their biggest and most important investment. Make sure you do it right.
Comments(13)