Overpricing
The right price produces the best return.
The most critical step in preparing to market a home is determining
the list price. All sellers would like to realize the highest
possible return from their property. It is obvious that pricing
a property to low cannot provide the highest return; it is less
obvious but true that pricing a property too high will produce
less than best return. The right price produces the best return.
Too high a price is costly because it causes a property to miss
its market. When a price is too high, those buyers for whom the
home would be right won’t see the house because it is out
of their price range. Buyers who are in the price range suggested
by the asking price will not see the property as a good value
and will buy something else. Further, agents will be reluctant
to show the property, except perhaps to make a competing property
look like a good buy. Good agents are not those who sell overpriced
homes to gullible buyers; good agents are those who present to
buyers homes which are good, fair values.
Sellers often fell that they want to test the market at a high
price. While there may seem to be no harm in starting high and
lowering the price if necessary, testing the market can be quite
risky. A property receives its fullest exposure in the first
three to five weeks on the market. The best buyers for any property
are those choice prospects who will see a property during those
first weeks. If it does not appear to be a good value, they will
decide not to buy, and it is rare that such buyers return to
the property later, even if the price is reduced. Thus, the seller
who tests the market may turn away the best of his potential
market.
Another danger of testing the market is that the seller will
come to believe in what started out as an exploratory price.
Even when the market provides evidence that the price is too
high, the seller will be unwilling to reduce the price or may
turn down an offer that is too low relative to the asking price,
but is actually the best offer that will be received. In an extreme
example, a seller whose house was listed at $600,000 turned down
an early offer of $450,000; a year and a half later the house
sold only after the asking price was reduced $395,000.
Pricing a home is part art and part science. Like science, the
pricing should be based on evidence — the prices paid for
comparable properties in recent sales. However, since no two
homes are exactly alike, the evidence must be evaluated and a
judgment reached. Because each of us has a great emotional attachment
to our home, the judgment of professional agents who can take
a detached viewpoint is vital.
The cost of overpricing can be high.
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