Both overpricing and underpricing your home when selling can be dangerous to your finances, for different reasons. However, both of these are similar in that they will result in an unfair market price. Now, it’s easier for a seller to understand underpricing, but overpricing is a trickier subject. Overpricing can be more of a hindrance to the seller! How exactly? Let’s go through the common drawbacks:
Homes priced out of their value range invariably take much longer to sell. The longer a home is on the market, the less valuable it becomes. Nobody gets excited about a property that has anguished for months and months on the market. In fact, the longer a home remains on the market, the greater the tendency for buyers to low-ball on the price. This may not be the case for ALL homes, but it is a common trend that happens for MOST homes.
Typically, the first few weeks of the listing period produce the most showings. If you price your home outside (above) the value range, the most interested buyers may overlook your property. This is because it doesn’t fall into their criteria. Buyers that find a house outside of their budget are far more likely to scrap that home from their list, rather than make a low offer to the seller that may come off as a low-ball offer. Buyers are just as apprehensive when making a low-ball offer, as sellers are about receiving low-ball offers. How many opportunities can one miss just because a home is priced higher than it should be?
The average buyer looks at many homes, both online and offline, before they find one home that is a near perfect fit for them. This means that they become familiar with the features and amenities that help to price homes in their price range. If they find your home is overpriced when comparable homes in your area are lower in price, they will likely not even submit an offer on your home. Even if you have the best intentions when you price your home higher, it is not seen in a good light by buyers.
If you are fortunate enough to find a buyer that is willing to pay more than market value for your home, you will likely face additional problems later on. The largest majority of home buyers require some kind of financing to purchase real estate, which normally requires an appraisal. Since the appraisal is done by a lender, it’s an objective assessment of your property. The buyer pays for this inspection / appraisal, and if the value comes in lower than they expected (a.k.a. your listing price is higher than the appraisal value) the transaction can be delayed or cancelled.
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