I love it when a client who has lived in the same house for 20 + years thinks they know how to price a house better than me. Don't get me wrong, as a homeowner myself, I pay attention to what sells in my neighborhood, and feel I have a pretty good idea of what homes are worth, but when a seller over prices their house by 20% compared to recent comps, it can create a little conflict. I do value my clients opinion even if I think it's too high. My clients are the boss, and if they insist on over pricing, I'll work with it as long as they are flexible to reality and will lower the price within a reasonable time.
My recommendation is to always price a home as close to it's value as possible taking into consideration market fluctuation and some other specifics that might apply to a particular property. I know that some sellers like to price their homes high and take the best offer. I prefer to list the home close to it's value, or even a bit low, giving buyers 14 days to submit offers. With the correct marketing in a seller's market, we can create excitement and drive the purchase price up to a realistic value.
The draw backs to pricing your home too high are two fold
1) Let's take a $200,000 home that is priced 20% over value. Now I am trying to sell a $200,000 for $240,000. The problem is that we are now competing with homes that ARE worth $240,000 and that might be a difficult challenge depending on what homes are out there.
2) Let's say I find a buyer who unwittingly is willing to over pay for your home. If the appraiser does not agree, expect the buyer to renegotiate the price. If you don't have back up offers, you are most likely going to find yourself giving up some of that generous offer.
Now let's say you take my advice and price your home so it's attractive in a seller's marketplace. We tell buyers we won't accept offers for the first 14 days. In this current market, we can expect multiple offers that lead to the highest and best offer. If an appraiser indicates that the home does not appraise, we can use the multiple offers to ask the appraiser to reconsider the value based on multiple offers. If the appraiser wont budge, we can ask the buyer to make up the difference between appraised value and the offer price, or we will go to the next offer in back up.