5 Risks of Overpricing a Home
In the San Diego Housing Market
If you don’t know who I am, I am Kim Ward, I’m a real estate broker, and I help executors administrators and trustees with homes in probate or trust administration.
Since you’re here, you’re probably curious about the five risks of over-pricing a home in the San Diego a housing market. It happens to the best of us, we think that our home is much nicer than the one next door, and of course, then we think our home is worth much more than it may be worth in whatever market there is. In addition to that, some people really don’t understand the ramifications of pricing a home higher than what it’s worth. Before we get into the risks of over-pricing a house, let’s look at why people do that:
- sellers say they aren’t in a hurry, they feel that if a naive buyer just happens to wanna purchase their home, then let’s do that.
- sellers have plenty of money, and it doesn’t matter whether they sell a property or not.
- sellers use national data systems such as Zillow to determine what the price is (Don’t do that, it’s a bad idea).
Zillow has an algorithm, it is not accurate, (dont believe me? check out these three articles article 1, article 2, article 3) and you really need to get an appraisal or have a real estate professional show you the true comparable properties that will determine what is the current market value of a property. Sometimes people think, ‘Oh well, but Zillow said this number’ and they feel like, ‘Oh, we can always lower the price later’ that’s not a good idea either.
Price is by far the number one reason our home sells or doesn’t sell. Try not to get sucked into the vortex of thinking you’re going to make more money by pricing a property higher than what the comparable properties show is the true value of a home. If you do get sucked into this thinking, here are my five predictions of what could happen
Number one, you lose the window of opportunity when a home comes on the market in the first few days or weeks buyers and their agents are excited that there’s a home that’s available. Because agents have buyers that are wanting to buy homes, probably in the market where your home is located. However, if the buyer sees a price that’s way high they may choose not to go and look at the property, and you know what? That can lead to no offers, and what else it leads to is…
Number two, it can cause the home to appear stale, if it’s on the market too long, buyers and their agents will wonder if there’s something wrong with the home or there’s a reason why it hasn’t sold yet when it’s been on the market too long. They’re going to wonder what’s wrong with it and perhaps not want to take a look at it.
Number three, experience shows you ultimately sell for less when over-pricing a home. Sellers that decide to start with a price that’s high for the condition of the home, and then they reduce the price to fair market value for the condition of the home, they almost always sell for less… Why is that? Because the perception is that once you’ve lowered the price, you’ll lower it again because you’re more desperate to sell the home.
Number four, it’ll be a longer period of time before you are relieved of the home that you want to sell. It’s a fact that homes that are priced higher take longer to sell, and some homes that are priced over market never sell until the price is dropped. This will cause the seller to feel frustrated with the entire process, and that’s something that I don’t want for my seller.
And number five, the home just does not sell. After months of inconvenience, spending money to prepare the home, and the excitement of the fact that the home is gonna go on the market and go through the process and be sold, the house just doesn’t sell due to the price it is listed at.
Homebuyers have become more sophisticated. Most buyers have appraisals, and the appraiser uses the comparable property information around the home. When the appraisal comes in at market value, below what the buyer offered, these are what I find to be the typical scenarios that follow:
- The seller lowers their price to the appraised value and the home gets sold.
- The seller ask the buyer to pay the difference between the appraised value and the offered or agreed upon price.
- The transaction falls apart, because no one wants to settle.
For more on this see this article from homelight: Your Dream Home Appraised Lower than Your Offer: Now What?
The fact is the seller, the appraiser, and even the real estate broker don’t really determine the price of properties, the homebuyer does. What they’re willing to pay is the price of what the home is worth, and what the buyer is willing to pay is also depending upon supply and demand, which can change over time. This is true whether it’s a buyers market, where the buyer is probably gonna pay less, or it’s a seller’s market, where the buyer is probably gonna be willing to pay more.
So the bottom line is, I recommend that you seek out the advice of an experienced seasoned real estate professional to help guide you through the entire process. They should have a pulse on the real estate market and be able to show you all the data, so that you can avoid over-pricing the home, and again, there are many strategies for selling a house and over-pricing is not one of them.
Now, you can an experienced real estate agent yourself, but if you really want someone who’s an expert, that would be me! and I’d love to help you! Or just answer your questions to help get you started. You can contact me at KimWard@HorizonRealEstate.net or call my office to speak with one of my staff members at 619.741.0111, I look forward to speaking with you!