As some of you sellers prepare to put your home on the market for the busy spring market, one of the most important decisions you will make is deciding on the asking price.
Should you choose to “push the market,” your home may sit for months and the selling process may ultimately end up costing you more than you anticipate. Be aware of these pitfalls when it comes to overpricing your home.
Time on the Market
Overpriced homes sit on the market and eventually become ‘stale listings.’
Buyers tend to approach these listings with an acute awareness and a plethora of questions: “Why has it been on the market so long? Is there something wrong with the listing? Is there something I don’t know?”
Potential negatives start to loom in their minds. These questions often lead to buyers walking away from the property or submitting a lowball offers.
Neither benefits you as the seller.
‘Price High, Reduce Later’
Be careful of taking the “we can always reduce the price if it doesn’t sell” approach.
When your apartment goes on the market, the greatest potential for buyer traffic is in the first 30–45 days. By pricing high with the intention of dropping the price later, you risk bypassing your best candidates for buyers.
If you reach a point where you must drop the price, reduce it once and make it count. Multiple price drops often lead to lower offers.
Unfortunately, when a home starts its listing life overpriced, it almost always sells for less than market value.
With few buyers to choose from, zero leverage because of time on the market, too high an asking price, and carrying costs to maintain the property; most sellers find themselves getting the least from their investment rather than the most.
If your buyer places an offer with a financing contingency (and most do), your home will have to appraise for the value of the purchase price.
Should you list too high and the appraisal comes in too low, you might find yourself renegotiating the price or losing that particular buyer.
You (or your real estate agent) should do a thorough comparative market analysis to decide on pricing as it compares to similar properties that have recently sold.
Remember that today’s lenders are more cautious than not and will base their loans on accurate appraisals and comparable properties.
Helping Your Competition
Why make your neighbor’s apartment look like a better deal than yours?
An overpriced home can actually help sell your market-priced competitors. Scan the inventory before listing your home.
If you are pricing higher than what is available down the block, make sure there are aspects of your apartment that justify the increase.
But the market ultimately dictates the value of your home.
Work with an experienced real estate agent to assess what that value is or if you are selling on your own, be sure to do your research.
Making the choice to overprice your listing can prove to be a timely and costly risk.
Brad Malow is the founder of BuyingNYC.com and an agent with Rutenberg Realty. He has been helping buyers and sellers navigate NYC’s complex real estate market for over 10 years. Visit the BuyingNYC Blog for more advice or contact Brad at firstname.lastname@example.org.