The last few months have seen an unprecedented tightening in many real estate markets across the country.
In popular areas sales have become skewed overwhelmingly in favor of sellers. Buyers seeking to purchase a new home have been met not only with dwindling inventory but with accelerating prices. Sellers have been able to bypass repairs or eliminate concessions.
In a market that exhibits these characteristics, certain buyers, ones that have access to additional cash have a great advantage. It allows them to make offers with larger down payments or to outbid other buyers in a multiple offer situation.
But what happens when the seller(s) or the seller’s agent adopt a mindset that they set their own price and ignore the fundamentals of pricing a home correctly? Several things happen and all of them are bad.
An overpriced home may effectively eliminate buyers that really want the house, but simply cannot meet the sellers' demand for a value beyond what they can afford. Instead, the seller receives offers that are too good to be true but have little chance of ever making it to the closing table.
One of the main advantages that sellers have in a tight market is the ability to project an image that “This is your chance!”, to the hungry group of buyers that have been anxiously waiting for something new to become available. That honeymoon period only lasts a few days and then the “This is your chance!”, becomes an “I wonder why it hasn’t sold yet?”
Even in today’s hot market, an overpriced home will still sit on the market too long. A house that sits on the market too long makes the listing agent look bad. It injects a level of concern into a buyer’s psyche and leads to lowball offers or more intense scrutiny of the condition of the property.
A solid offer by a sincere buyer at the correct price is still the best recipe for success. Don’t let greed or lofty goals cloud your vision. Pricing a home correctly still matters.