Home Sellers: Overpricing Your Home Can Be Risky Business

Location and condition aren't the only things that can keep you from selling your home. In a healthy real estate market, houses that don't sell after a while are at a significant disadvantage. One issue that can keep an otherwise desirable house from selling is a price that's too high.

Many homeowners are eager to set a relatively high price when they go to market.

There are several reasons:

• They believe that by setting a higher price, they will leave room for buyers to negotiate.
• They expect that by selling at a higher price, they can save money financing a new home.
• They include the "invisible" sentimental value of their home when calculating the price.

Unfortunately, there are good reasons why a higher asking price spooks buyers. It can take qualified buyers out of the running even if they can afford the home.

If you are selling your home, learning about pricing can help.

The Psychology of Pricing Can Scare Qualified Buyers Away

In big-ticket items such as houses and cars, pricing is anything but an exact science.

Unfortunately, the more valuable an item is, the easier it is to misjudge its fair market value. This is especially true of things, such as houses, that cause great sentimental attachment.

In many cases, people who are otherwise ready to buy your home will decline to make an offer not because they feel the price is unreasonable but because better bargains are available.

What's more, there are psychological factors involved:

• Buyers might feel that offering less than the asking price will be offensive to the seller.
• Buyers may believe (incorrectly) that the seller already knows the house is overpriced.
• Buyers typically assume the seller has already entertained other "lowball" offers.

When selling your home, the price is an important signal to prospective buyers. If the price is not in tune with both your needs and market conditions, it will create confusion.

Remember, this doesn't mean a house has to be underpriced just to sell! Instead, sellers should look to the expertise of a trusted real estate professional for a proven pricing methodology.

How Should Sellers Price a Home When They Want Results?

To develop an accurate picture of the fair market value of a home, ask your real estate agent to prepare a comparative market analysis (CMA) for you. They will look at recent sales in the neighborhood as well as sales of comparable homes — those with similar amenities.

Only after doing this research is it possible to select a price that:

• Helps the sellers achieve their financial goals through the sale of the home.
• Ensures the home gets sold fast enough to avoid stagnating on the market.
• Attracts several qualified buyers, the real negotiating leverage for sellers.

The price a real estate professional comes up with may be lower than what you first expect. However, a good home can still be priced somewhat higher than average for the local market. In the long run, this leads to an easier and more rewarding selling experience.

Pricing Issues Can Sink Your "FSBO" Listing

Many sellers choose "for sale by owner" methods because they think it'll be quicker and easier. When it comes down to it, many FSBO listings are either overpriced or underpriced. Studies show FSBO listings sell for substantially less than agent-led listings.

No matter what your goals are, your first step in selling your home should be to contact a reputable local real estate agent. That way, you can get on track for the results you want.

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