If your home is priced high given the market and is perceived to be overpriced, you will get fewer showings, and there will be fewer buyers who want to buy your home. In general, you can get away with or try a price point that is slightly above average market (up to 10%) and still get some interest and showings, but activity will generally drop off significantly if the price is higher than 10% above the average. Every seller wants to get the best price for their home but be aware that you can run into some problems with overpricing when selling your North Metro Denver home.
Problems Encountered When Overpricing a Home
Even an overpriced home that is new on the market will generate some curiosity in the real estate agent and buyer community, but an overpriced home will attract less, and can lose the benefit of initial market momentum. An overpriced home also provides justification for a competing home’s value. A buyer might say, “I like them both, but house #2 is much less expensive.” This is one of the many issues you may face with overpricing when selling your North Metro Denver home.
Another thing to keep in mind is that overpriced homes typically do not appraise. This means that when the lender orders the appraisal the appraisal is below the purchase price and the loan-to-value ratio is out of whack. This means the lender either will not loan on the property at the agreed upon purchase price, or the buyer must increase their cash down payment amount. In such a case, the buyer has the right to terminate the contract.
90% of all homes do not sell because the price is unrealistically high compared to the market and other options. If you’ve overpriced your home, market offers can appear to be lowball offers, but they are not. It is important to be realistic and a good real estate agent should help you with this.
If your North Metro Denver home is overpriced you may be waiting a long time for the right buyer to come along. In a declining market, sellers chase the market down and end up leaving money on the table. Sellers eventually settle for a lower purchase price and the holding costs means they’ve actually spent more money. If they had priced the home better it would’ve probably sold faster and holding costs would be less.
Overpricing and Your Real Estate Agent
A really good real estate agent may be able to increase the negotiated price of your home up to 5%. But they will remain realistic. If a seller demands an unrealistic price, they may lose their desired real estate agent. Savvy real estate agents may choose not to agree to list a home that is overpriced. Real estate agents are paid commission, but only when a home sells. Good agents understand the market and the value of their time. They do not want to waste their time, effort and their money marketing a listing that is overpriced. A great real estate agent will usually not encourage overpricing when selling your North Metro Denver home. A real estate agent may agree to an overpriced listing only if there is agreement on a price adjustment schedule.
As a seller, it is easy to blame the real estate agent when your home isn’t selling. Many of the sellers whose homes do not sell because the price is too high, blame the real estate agent. However, 90% of all sellers who hire a second real estate agent agree to reduce the price. Then when the home finally sells, some sellers are left with the belief that the issue was the first real estate agent, and not their overpriced home.
Listen to the Market and Act Accordingly
What is the market telling you? What has the feedback been from other agents and buyers? If your agent can go back and summarize this information for you, there is probably a common theme. Either your home looks bad and is not appealing, or the price is too high, or both. Have you had any offers? If none, you are probably way overpriced – so far overpriced that a buyer feels like it is a waste of time to even submit an offer because of the gap between what their offer would be and your asking price. If you have gotten offers that you turned down, go back and look at those offers and what the market values were at the time. The market will likely have changed since then, but you can extrapolate what the proper price might be for your home.
What Should You Do With the Overpriced Home?
You either need to reduce the price to meet the market or add value to the home to make it more desirable (which is not easy to do). The good news is that it is never too late to lower the price to meet the market and see the activity of showings and interest increase. It’s important you have a realistic perspective that if you don’t see the activity in terms of showings, and positive feedback, then you need to be prepared to reduce your price or wait for the market to rise to your price.
How Can I Help You?
I hope this article has shown you that I am a knowledgeable and very honest real estate agent who wants to help buyers and sellers. I want to provide my clients with interesting and up-to-date information so they can make informed decisions. If you think that my expertise and positive attitude might be of service to you don’t hesitate to reach out and contact me!
Residential Home Specialist & Global Luxury Specialist
Coldwell Banker Residential Brokerage North Metro Office