Is There an Advantage to Overpricing Your Home?

I have been in this business now for twelve years.  When I first started out I got a lot of experience with buyers, but not very much with sellers. Over the years I have listed two of my own homes for sale and hundreds of rental properties.  The ones I listed for myself sold really fast and for decent prices. I knew enough to know how the home should look to make it appeal to buyers and where to price it at.

I have recently decided that I wanted to get back into residential sales again, as well as property management. There isn’t a lot difference between listing a property for sale or rent. To get an idea of pricing, for either you look at the numbers and the condition of the property in comparison to other similar properties and you get a good starting figure. 

So what is it that makes an otherwise intelligent person who is given good hard market facts about what the price of a home in that particular area, with similar amenities, and features, decide that they want to list their property at a price that makes no sense? 

I have recently come across several of these people and have really tried to understand what they think will be advantageous about pricing over the market.

Here are some things I know for sure about an overpriced listing:

1.     It will sit on the market for a long time. 

Is that an advantage? I don’t think so. Any new buyer that sees it will wonder what’s wrong with it? Why has it been on the market forever? They will no doubt think they can come in with a really low-ball price too, since it has been sitting so long, the seller must be desperate. 

2.     It will confuse other potential sellers.

I have had many a seller/landlord state that a property in the neighborhood is "going for" a particular price, so they think they should list around that price. I try to explain that the price a listing is at, doesn’t reflect the price it will sell or rent for. 

Is that an advantage? It may be. It could encourage less competition, as other sellers may wait to see what happens wit the overpriced listing, before listing their home. It doesn’t mean it will sell for that price though. 

3.     It will not appraise.

If the overpriced listing even gets under contract, the appraiser will be using the same information that the listing agent used, to determine the value of the property.Obviously, that is not an advantage and someone is out the money for the appraisal. Yes, there could possibly be a cash buyer, that would just love to overpay for a home, but not very likely.  

I am sure there are plenty of other reasons not to overprice a listing, and no real advantages that I can think of.  These examples are enough of a reminder for me, of why it is a waste of time, to take on an overpriced listing.