Sellers often wonder why they haven’t received an offer on their home. After all, their house is very nice, it is renovated and they have invested a lot of money in it. The answer is that the price is probably too high. But, “buyers can always make an offer, right?” Of course they can, but serious buyers generally don’t make an offer on a home that’s priced too high.
Sellers often think that if buyers like their home enough, they will pay more for it. The truth is that a house is worth a certain price, which may not necessarily be the price sellers want. Buyers know market value better than sellers. While sellers may look at a few houses before putting theirs on the market, buyers look at dozens of houses. By the time they decide to make an offer on one, they have a good idea about home prices.
Many sellers know the market in their specific neighborhood, but buyers are often looking in multiple neighborhoods and are not always specifically married to one neighborhood.
Because last year’s market value was rising rapidly, sellers were getting top prices and offers above full price, and desperate buyers were paying full price for nearly every home coming on the market. Some buyers were even paying above the appraised value. Fast forward to 2014 and that hot seller market is over, but sellers keep citing last year’s market data and can’t believe things have changed so drastically since last year.
There are many homes for sale this year, and buyers can view multiple homes before choosing one. Sellers who unrealistically price their home send a message to real estate agents and prospective buyers: there are unrealistic sellers here who can be difficult to work with. Like all of us today, homebuyers are busy people who don’t want to waste time with unreasonable sellers. Most would rather wait for a price reduction before beginning negotiations on a home they truly love.
We often hear that sellers are afraid to “leave money on the table” or “I’m not going to give away my house” or “I’ve put so much money into this house” or “I’m not in a hurry.”
Many sellers are very emotionally attached to their homes. The work and money they invest in their home has a monetary value in their minds. Buyers, on the other hand, are much more hands-on as they are not yet attached to the home and see it as an investment. Buyers generally don’t value updates a seller has made as much as the seller. The reason for this is twofold. First of all, buyers may not like the upgrades or would have done it differently. The second reason is that buyers often feel they can improve their new home for less and to their liking.
My best friend just bought a house with very trendy butcher block countertops that were brand new. He didn’t like the look and took them out and put them on granite. There was no value in those countertops to her.
When sellers discover that their home is priced too high, they must immediately lower the price. A house is most marketable when it is new on the market. If it doesn’t sell within the first month, agents and buyers lose interest. New listings stay fresh in real estate agents’ minds only for the first few weeks they are on the market. That’s why it makes sense to drop the price on an overpriced listing early in the trading period. After a listing has been available for a few months, a price reduction will not have the same impact because many agents have already forgotten about the property.
Buyers don’t like to make an offer on an overpriced listing and real estate agents don’t like to show them. Put yourself in the agent’s shoes. If you’re working with well-qualified and motivated buyers who just want to see well-priced homes that fit their needs, why would you risk losing credibility by taking them to view an overpriced property?
Pricing your home right at first can make a big difference in how effective you are in getting the most out of your home.