A Zillow survey reported that 53% of sellers had the same biggest concern - not being able to sell their home for the price they want. And we totally get it. For most homeowners, maximizing their profit is one of the top priorities when it comes to selling.
But with this, also comes the misconception that pricing high will get them top dollar for their home.
On the surface, the logic makes sense - “The higher the price, the more I’ll get for my home, and even if offers come in a little lower, I’ll still get a price I’m happy with.”
While this strategy does seem to provide a safety net, it could actually cost you more in the long run.
1. Wasting Your Golden Hour
The first week after listing is the golden hour of marketing your home. Within that short window of time, the goal is to stir up as much buzz and excitement around your home as possible. The more interest you generate, the more buyers you will attract, creating the perfect environment for a bidding war.
When your home is priced too high, you risk losing this huge crowd. If people see that your home is overpriced, it will immediately turn them away. They might not know exactly what the fair market value is, but their agent will do the research and advise them to look elsewhere.
This is especially true if there are other active listings in your neighborhood. When buyers see your neighbor’s home with the same features but at a lower price, they will naturally gravitate towards that one, leaving yours long forgotten.
Some may never even get that chance. Even if your home might be the perfect match for them, if it’s outside of their budget, it will not populate when they search for properties online. For example, if your home is worth $675,000, but your asking price is $725,000, you will lose out on ideal buyers looking around $650,000-700,000. Instead, the people who do view your home will be comparing it to competitors in the higher price range that seem far more worth the value.
Instead of putting the spotlight on your home, successfully selling at top dollar in just a few days, your home will sit in the shadows, eventually growing stale on the market.
2. Longer Days on Market
Once you miss your grand debut, the chances of making up for it are slim to none. Overpriced homes tend to have very low activity, with no offers and only a handful of scattered showings. As time goes by, the days on market will begin to rack up, presenting a new problem.
When buyers see that a home has been on the market for a long time, it instantly raises a red flag and floods their mind with doubt. They begin to wonder. “Why hasn’t it sold yet? Is there something wrong with the house?”
Doing a price reduction will cause the same speculation. Buyers will most likely conclude that your home is not worth the price and offer even less. At this point, the majority may be investors with low-ball offers or less-qualified buyers looking for a a great deal.
It makes matters worse if you are on a time crunch. Imagine you were relocating out of state for your new job that starts at the end of next month. All of your plans would come to a halt until you can sell your home. Not only would that force you into a high-stress situation, but it may also leave you no choice but to accept an even lower offer as you scramble to make the move on time.
If you’re looking to buy a new home, having the contingency to sell your current one makes your offers weaker, especially if it shows no signs of moving. (Not to mention that the current market is already a challenge for most buyers.) Even if your property is not in contract yet, if your agent is able to show that it is priced right and expected to sell quickly, it will strengthen your position and raise your chances of getting your offer accepted for your new purchase.
3. Understanding the Buyer Psyche
As surprising as it may be, many buyers are willing to overpay for an underpriced home, but will not pay for an overpriced home. We have seen this happen countless times in the past. Let’s take a look at an example in our local market.
Earlier this year, a home in the highly-desired community of North Chino Hills hit the market at $1,350,000. It was a beautiful home with 5 bedrooms, 3 full bathrooms, and stunning mountain views. In just 6 days, it was already under contract for $70,000 over asking price, and closed escrow 7 days later at $1,420,000.
A few doors down, a gorgeous home with the same characteristics and similar layout was listed at $1,450,000. Unlike its neighbor, this house sat on the market for 42 days. After 4 consecutive price reductions, it finally sold a month later for $1,215,000 ($235,000 less than it was listed for).
So what was the reason for the $205,000 difference between the two nearly-identical homes?
The answer is simple - one was priced well, the other was not. When buyers flocked to the first home, it resulted in a bidding war. Locked into a fierce competition, buyers knew they had to offer more to climb their way to the top. But they were willing to pay that price. Just like any other asset, when something is in high demand, people are willing to pay a premium, and as it increases in popularity, it becomes more desirable.
With that being said, drastic underpricing comes with its own set of negatives. The key is to price it just right. Your agent should be able to help you determine the fair market value and provide an effective pricing strategy.
Don’t want to leave money on the table?
Schedule a call with the local experts to see how our clients were able to sell their home for top dollar in their desired timeframe. We’d love to see share our proven strategies that can help you reach your goals too!