The BROKER’s BLUEPRINT: Overpricing Your Home for Sale
Written by: Andrew Goodman
This past weekend, I had a listing appointment in which the seller wanted to list their property for more than my recommendation. So, I explained my concerns with listing the home over what I believed to be market value.
It is wise to strategically maximize your potential return on investment. But, in some cases, it is not favorable to stretch too far.
Realtors® are hired to help sell properties and we intend to maximize the seller’s return. We have resources at our disposal, which help us determine the market value of a property. These tools combined with the sales experience of the Realtor® help determine their recommendation for the highest and best listing price/strategy. Although Realtors® give their recommendations and opinions, the seller should always make the final decision.
When a property is listed for sale and a contract is submitted, the property will need to realistically appraise for that value (unless its a cash offer). If the property doesn’t appraise, it is very unusual for a buyer to willingly come up with the cash difference and the bank will definitely only lend based on the appraised value. I address this because a licensed appraiser will use similar market research, as the Realtor, to determine the value of the property. So why would their value be significantly different from the Realtor’s® suggested list price? The simple answer is that it shouldn’t. If there is a contract on a property for $700,000 and the home appraises at $675,000, do you think the buyer is going to pay out an additional $25,000 cash to buy it? No, the buyer will likely negotiate with the seller to reduce the purchase price. Logically, the buyer isn’t going to buy a property for more than its worth. In my opinion, no matter what a Realtor® suggests nor what an appraiser determines, the true market value of a home is what a buyer is willing to pay for it in the current market.
Unfortunately, some agents will list a property at an inflated price just to appease the seller and get the listing. After the initial two weeks on market, all parties will likely realize and admit that the property is overpriced based on lack of activity/showings. Unfortunately, after those first 14 days, the home will not be considered “new to the market” and will likely have lost most of its momentum; serious buyers and valuable agents are watching the market everyday for new inventory.
I always recommend listing a property competitively, but correct, from day one. It is important to make sure the home is priced right, all pictures and brochures are completed, and the home is physically ready to be shown on the day it hits the market. Otherwise, you put yourself behind the competition, experience a harder time to sell, and most likely decrease your return on your investment.
(The seller I met over the weekend agreed with my recommendations and I am confident the property will sell quickly and with a maximum return on the seller’s investment!)