I think every REALTOR has worked with at least one seller in their career that wanted to “test” the market and overprice their home. Some sellers feel their home is superior and justifies a higher asking price while others simply think they’ll be able to defy the odds.
As a REALTOR I educate my clients about the current market conditions and suggest a list price. Some of the information I provide is based on fact and some if it is based on my market knowledge and 15+ years of experience. While a majority of the seller’s I work with listen to my suggestions and price accordingly occasionally a seller will come along that wants to “try” a higher list price even though the market clearly doesn’t support it.
In my experience not only do overpriced homes take longer to sell they net less money, so it’s imperative for sellers to select the right list price from the start, not “try” a higher price and reduce down the road.
A quick note before I share how a seller wanted to test the market and got burned. Every real estate transaction is different, so my pricing and marketing strategy will vary from listing to listing. Sometimes I will suggest a list price well above the highest sale while other times it may be right in line with the comparables. There are many factors that come into play when pricing a home. My goal with every transaction is to put my market knowledge, experience and marketing to work for the seller’s and obtain top dollar for their home in the shortest amount of time.
The Seller who wanted to “Test” the Real Estate Market and Got Burned
Below is a real scenario that took place, the numbers are slightly changed to protect the guilty, but the percentages remain the same.
Highest Neighborhood Sale: $320,000
Recommended List Price: $330,000
Anticipated Sales Price: $325,000 to $335,000
Based on the market conditions at the time I was confident we could push the envelope and ask for more than the highest neighborhood sale, whether or not it would appraise was a bridge we’d have to cross when we got to it because there wasn’t one supporting comparable.
I recommended a list price $10,000 above the highest comparable, now keep in mind the remaining comparables were significantly less than the highest sale. The seller wanted to “test” the real estate market and wanted to list at $350,000, they felt asking $20,000 more than my recommended list price and $30,000 more than the highest sale wasn’t a big deal because “a buyer would want to negotiate anyways.”
First impressions are everything and that includes the asking price! I expressed the importance of not overpricing their home and explained there is a fine line between pushing the envelope and setting it on fire. At the time homes were going under contract within 7-10 days of hitting the market and selling for full price or very close to it. After reviewing all of the comparables, market conditions, and my pricing strategy with the seller’s again they were still insistent and confident asking $350,000 was the right decision.
So we hit the market at $350,000 and had a flood of showings the first week, which is normal because buyer’s don’t want to miss out, they want to be the first to see a new listing so they can either submit an offer or rule it out. The first week quickly passed, we didn’t receive a single offer and by the second week showings came to a halt. After a month I urged the seller’s to reduce the price because the market clearly rejected it, but they remained confident the “right buyer” was out there.
Fast forward six months later and several price reductions we finally found a buyer! As I anticipated the home sold for more than the highest neighborhood sale at $328,000 to a cash buyer. However the home sat vacant the entire time we were on the market, so instead of paying overhead for a month or two the seller’s ended up paying overhead for 6 months, which substantially cut into their profits.
Had the seller’s listed at $330,000 and accepted an offer for $328,000 after paying for two months of overhead they would have netted $323,200, but instead they decided to “test” the market and netted $313,600.
My number one goal is to obtain top dollar for all of my listings, which requires the right pricing strategy because the wrong one will result in an overpriced home that sits on the market costing the seller time and in some cases money every single day.
If you’re looking for a REALTOR who is honest, trustworthy, one who is able to educate you about the market conditions, put together a comprehensive pricing analysis and strategy for your home accompanied with a great marketing plan call me today for a no obligation in-home consultation.