How Overpricing Your Home Will Cost You In The End
There it is: your home!
Just sitting on the market. It’s been like that for some time now, and it’s starting to look a little … desperate. Last-guy-at-the-bar desperate. You consider reducing the price, but then you might be robbing yourself of thousands of dollars. But if you don’t, you could end up missing out on eager buyers with a slightly lower price point. So when exactly should you cry “uncle” and lower that asking price?
The thing that can cost you the most money is having your home stagnate on the market. So unlike dating, you shouldn’t wait for the perfect suitor to come along. Perfect is a high bar. Houses set at the right price will start getting offers within the first week. Are comparable houses selling left and right, but you haven’t received an offer? Once you’ve been on the market for five weeks or so, you’re chasing the market.
How long has it been?
If you haven’t seen any action in a while, it might be time to take your house off the market, do some touch-ups, and relist. I sold a house that had languished for six months on the market by removing the listing, having the sellers pull up the shag carpet—something their original seller’s agent didn’t make them do—and staging the place much better. It was relisted and sold within a two weeks at asking price.
The golden rule: Know thy market
Above all else, you need to consider your market. There’s no universal timeline that will tell you when to reduce your price.
Consider these three key points:
How are comparable properties faring in the market?
Are they selling quickly or lingering on the market?
If they’ve closed, what was their closing price? What is the average time a home stays on the market in your neighborhood?
If you haven’t reached that point, don’t reduce it just yet. Likewise, if you’re well past your hood’s “sell-by date,” it’s time to start cutting prices and maybe even delisting your home.
How many homes had a price reduction in your neighborhood, and how long did it take for the price cut? Did it help them sell? Again, what was the sale price? In other words, do your homework and work with the market—don’t fight it.
Keep tabs on—and listen to—house hunters
Are your open houses turning into a letdown? Are buyers visiting but walking away? If 35 to 40 buyers have passed through your home and not a single one has placed an offer, it’s time to seriously consider a price improvement. Translation: a reduction. As a seller, you should be asking buyers and their brokers for feedback after private viewings. Pay close attention and see if there are any common positives or negatives in their responses, so if a current theme is “It’s a bit expensive,” then you’ll know it’s time to start a price drop.
My Best Advice
Here’s something you should consider when debating the great price chop: The market will probably decide it for you anyway. It’s almost impossible to underprice, because the market will bring it back up. Think of it like eBay. You list an item for $1, but you know it’s worth somewhere in the $250 range. Eventually people start bidding, and some people might want that item so much they end up paying $275 for it. It’s actually a better move to slightly underprice your home than it is to overprice it, because you’ll have more offers to work with—and you can work the competition into a frenzy. It’s called leveraging power. If I’m a motivated buyer and I know there’s only three offers, I’m going be less aggressive than if I were competing with 10 offers.