Are You Guilty of Chasing the Market? Home Selling Pitfalls

When a homeowner is considering whether or not to list their home for sale one of the biggest deciding factors is price. Some homeowners want to sell their homes for a certain price while others need to sell for a certain price. However, just because a seller “wants” or “needs” a certain amount doesn’t necessarily mean the real estate market will support it. When selling a home setting the right price is crucial in order to attract buyers and achieve a successful sale.

Unfortunately, many sellers fall into the trap of overpricing their homes because they think their home is worth a certain amount or they want to sell for a certain amount. When sellers overprice their homes, reduce the price, and continue to do so until it sells is commonly known as “chasing the market.” Let’s take a closer look at the dangers of chasing the market and tips to avoid doing so.

Understanding “Chasing the Market”

Chasing the market refers to overpricing a property, aka listing it for more than it’s actually worth. This is often fueled by a seller’s emotional attachment to the property, unrealistic expectations, and/or a misguided belief that the property is somehow superior to others in the area.

Sellers may base their inflated price on factors like extensive upgrades, personal sentimental value, or the need to cover transaction costs and other expenses. However, what they fail to consider is that buyers in the real estate market are well-informed and base their decisions on market trends, comparable properties, and current economic conditions. Not what a seller wants or needs for their property.

The Perils of Overpricing
When a seller chooses to overprice their home they can end up chasing the market and encounter many pitfalls along the way. Here are just a few of those pitfalls:

Extended Time on the Market: Overpriced homes tend to sit on the market for prolonged periods of time. The longer a property sits unsold, the less attractive it becomes to potential buyers. In turn, this can then lead to a negative perception of the property and make it harder to sell even if the price is eventually reduced. Many buyers will assume something is wrong with the property or the seller is difficult, so they won’t even look at it.

Reduced Buyer Interest: In today’s world buyers have access to an overabundance of information available at their fingertips. So many buyers are well-educated and have their finger on the pulse when it comes to the value of homes listed for sale. Additionally, their Realtor will educate them about the current market conditions and share recent sales that are comparable. Consequently, an inflated listing price may deter potential buyers from even considering the property, resulting in fewer showings and limited buyer interest.

Lower Offers: Overpriced homes often receive low-ball offers for several reasons. One, buyers know they will most likely be the only offer, so with no competition they have no to lose submitting a low-ball offer.

Two, knowing the home is overpriced they may believe they have room to negotiate due to the inflated starting price. While lowball offers can be disheartening and even frustrating for a seller, it’s one of the realities when overpricing a home.

Appraisal Challenges: Even if a buyer is willing to overpay for a home if they are obtaining financing an appraisal will more than likely be required. Not only will an appraisal be required the home will have to appraise for the contracted price otherwise the buyer may not be able to secure financing.

In most cases, if the buyer is within their contingency periods they may be able to cancel the contract and receive their entire escrow deposit back.

Missed Opportunities: When a new listing hits the market a majority of the showings will take place in the first week or so. However, overpricing can cause sellers to miss out on potential buyers who might have been interested if the property were priced appropriately. These missed opportunities can be costly in terms of both time and money.

It's not uncommon for home sellers to make mistakes and overpricing their home is a big one. Are you guilty of chasing the market? #realestate #homeselling Click to Tweet

Setting a Competitive and Realistic Price
To avoid the perils of overpricing and chasing the market, sellers must take a pragmatic and data-driven approach when determining their listing price. Here are some essential steps to follow when determining a list price:

Comparative Market Analysis (CMA): Hire a knowledgeable real estate agent who can provide a CMA, which involves analyzing recently sold properties, pending sales, and active listings in the neighborhood. This analysis will provide a clear picture of the market trends and help establish a competitive price range for the property.

Consider Market Conditions: Take into account the current economic climate, interest rates, and local housing market trends. A seller’s market may allow for slightly higher prices, while a buyer’s market will demand a more competitive pricing strategy to attract interest.

Be Realistic About Upgrades: While upgrades and renovations can add value to a property, it’s essential to set realistic expectations. Not all improvements result in a dollar-for-dollar increase in the property’s value. In fact, a majority of improvements won’t have a 100% ROI and in some cases, they won’t add any value at all. While upgrades may be a selling point not all buyers will pay more for those upgrades. In some instances, some upgrades aren’t considered upgrades at all and will be expected.

Avoid Emotional Attachments: It’s understandable that some homeowners have emotional ties to their properties, especially if they’ve raised their family there. However, emotional value doesn’t translate into monetary value. Sellers need to be objective and detached when pricing their homes.

Stay Competitive: Sellers need to keep a close eye on their competition, especially those that sell quickly. If homes are going under contract and selling but their home is just sitting on the market they need to be ready to adjust their listing price.

Final Thoughts
In the world of real estate, setting the right price for a property is a delicate balancing act. Overpricing a home can lead to significant setbacks and missed opportunities ultimately leaving a seller chasing the market. So sellers need to avoid the temptation to chase the market and instead, adopt a data-driven and realistic approach to pricing. Doing so can help sellers attract more buyers, reduce time on the market, and increase the likelihood of a successful sale.

Hiring a top Realtor can prove invaluable in navigating the complexities of selling a home especially when it comes to pricing it. Realtors don’t have an emotional attachment to the property, so they’ll be able to provide honest advice and feedback. In addition to pricing, they’ll be able to provide suggestions to obtain top dollar, such as staging and curb appeal. Sellers need to remember, an accurately priced home is the key to a successful real estate journey otherwise they can end up chasing the market.

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It's not uncommon for home sellers to make mistakes and overpricing their home is a big one. Are you guilty of chasing the market? #realestate #homeselling Click to Tweet

About the Author

Top Wellington Realtor, Michelle Gibson, wrote: “Are You Guilty of Chasing the Market? Home Selling Pitfalls”

Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell, or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.

Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, and more.

Are You Guilty of Chasing the Market? Home Selling Pitfalls