We all want to believe we received the highest price possible when we sell our property. However, there are several factors to consider before setting a price. All too often, we see agents who are eager to get a listing agree to sell at a price that is way over market value. This is called “buying a listing” and it happens often to appease a seller who wants as much as possible for their property. This tactic often leads to disappointed clients as they see their property stay on the market for extended periods of time. Additionally, it frustrates buyers.
Here are factors to consider when setting a listing price and what can happen if the price is too high:
Market Realities: The real estate market might not support the suggested high price. It’s important to be able to back up your price. What does that mean? Where’s the data to prove/show that your asking price is justified? As long as you have comps, or additional details to show potential buyers why the property is priced where it is, you’re working within market realities. Keep in mind that markets fluctuate due to a variety of factors and just because a house down the street sold for X, that doesn’t mean yours will sell for X+.
Time on Market: A property priced too high can deter potential buyers and also result in a longer time on the market. Many buyers have a budget when shopping for your property and will not consider your home if it is even 5-10% higher than their budget. More time on market also invites more buyers to submit low offers as they assume you’re in a more desperate situation to sell, having been on the market for an extended period of time. Realistically, you may only be a few thousand dollars apart and a deal could be struck, but since the property has sat, the buyer assumes they can go much lower when making an offer.
Negotiation Challenges: Overpricing can make negotiations difficult. Buyers might perceive the high price as unrealistic and be discouraged from making offers, or they might negotiate aggressively assuming the price is inflated. We see properties go under contract and then back to active status multiple times as negotiations fall apart without sufficient inspection credits or a low appraisal.
We have a track record of selling homes in markets we know well at a price that meets or exceeds our clients’ expectations. Here is how we do it:
We do a detailed Comparative Market Analysis (CMA) and calibrate this based on our
knowledge of neighborhoods, zoning, upgrades and many other factors that affect the value of the property. This analysis helps in determining a competitive price that aligns with the market and can be justified to potential buyers.
We order an appraisal of the property. You now have a unaffiliated, licensed, third party opinion of value.
We have an inspection done of the property so potential buyers know exactly what they are getting. This helps alleviate negotiations around inspection items up front.
This process provides solid data points that show the value of the property and justifies the selling price to potential buyers and their agents. It also helps to make listing your property simple and that is what we are committed to do with all our clients as they go through this important process.