It started out innocently enough. Mr. and Mrs. Homeowner decided they wanted to sell their house so they could move “back home.” They told the agent they decided to hire that although they loved their time living in Florida, their roots were elsewhere and their kids had long moved away so there was nothing keeping them here.
Nothing except the house they owned and the fact that they needed to sell it to finance their move and purchase a smaller place when they got back home.
In fact, they were so eager to get on with their lives that they had already started selling some of their furniture and boxing up the items they didn’t need for daily life. The plan was to do everything right in order to facilitate a quick sale. They had searched the internet thoroughly for the best tips on how to sell for the most money.
They hired a home inspector and made every repair he recommended… and even a few he said weren’t really all that important. They gave the exterior and interior a fresh paint job and spruced up all the flower beds. The home looked like something straight out of Good Housekeeping Magazine.
Then came the time to hire an agent to list and market their home. They interviewed several and although all seemed qualified, they felt that they “connected” better with one than the others so they chose her. The agent gathered all the pertinent info needed for the MLS listing and included a couple of dozen super nice photos (in fact, she hired a professional photographer). She even payed for a virtual tour – you know, the kind where a camera appears to be in the center of each room rotating around making the walls looked curved/distorted. She said that the listing would also be placed on her broker’s website as well as the franchise’s parent website.
Then they waited…. and waited…. and waited…. and waited while other houses in the area sold. But nobody made an offer on their house. Finally, after about 6 weeks with no offers their agent suggested lowering the asking price.
Still no offers came, so they tried lowering the price again one month later… and then again and again and again… but to no avail. They were finally at a point where they simply could not afford to sell and move because they couldn’t make any profit on the sale of their existing house.
So what happened?
Why didn’t this beautiful home which was in immaculate condition attract any offers at all?
A careful examination of the market conditions at the time they first placed the home on the market compared with the market conditions each time they lowered their asking price showed that their price was always a little higher than their competition.
Bottom line? They OVERPRICED their home and killed any chance of selling it.
Don’t misunderstand… prior to placing their home on the market, each real estate agent provided them with a CMA (Comparative Market Analysis) but none of them fully explained just what the analysis revealed or how the list price affected their ability to sell their home.
Not one of the real estate agents provided in-depth CONSULTATION. The agent they chose allowed them to make the same fatal flaw that so many other sellers have made over the past 5 years.
THE FATAL FLAW? Thinking that they needed to “leave room to negotiate” when pricing their home. (Like so many others, they thought that buyers would offer a lower price on their home “because their home was better than the other homes in the area” and the higher price would allow room to negotiate.
If you have been trying to sell your home under this same misconception, now is the time to take a look at the major reasons that this line of thinking simply does not work in today’s world of real estate sales and marketing.
1. APPRAISAL DIFFICULTIES
Even if you happen to find a buyer willing to pay more than fair market value for your home, the raw fact is that more than 9 out of 10 buyers require a mortgage loan in order to purchase. If you house will not appraise for the agreed upon purchase price, the sale is most likely destined to fall through.
2. A SHORTAGE OF SHOWINGS
Buyers, today, are quite savvy. They are well educated about the real estate market. They often know far more about competing properties than sellers know and they are hell-bent on finding the very best deal they can find. If your house is overpriced, they won’t even bother taking a look at it… much less make any offer on it.
3. BRANDING PROBLEMS
Here’s the deal… whenever a new listing comes on the market, every real estate agent in the area who has a buyer looking for a home like it immediately checks it out to see if it’s a good fit for their buyer clients. When they see your overprice home, they BRAND it as “overpriced” and don’t even tell their buyers about it. They may watch it to see if you reduce the price to fair market value but the buyers won’t even know it’s on the market. Re-energizing any interest in your listing is likely to require drastic measures… like pricing much LOWER than fair market value.
4. DON’T SELL YOUR COMPETITION
The concept is simple but for some reason we seem to forget it when selling real estate. That concept is that “price sells” and buyers do shop for the best deal around. When you overprice your house, you make all the others around you seem like bargains. I don’t think there’s any more frustrating feeling than seeing your neighbors put up SOLD signs… especially when you know that your house is nicer!
5. STALE BREAD DOESN’T SELL
Just like bread on a grocery shelf, the longer your house sits on the market, the more likely it is to become stale! Think about it… you’ve likely seen homes that seemed to always be on the market (signs go up and come down and go up and come down…). It is only natural to wonder “what is wrong with that house?”
6. STARTING BEHIND THE EIGHT BALL IN NEGOTIATIONS
Okay, the truth is that some overpriced homes do get offers (they are almost always much lower than you’d think) but what happens when you counter the low offer? The buyer knows that you home has been on the market longer than the norm and they know where your starting price was and how much you’ve already reduced it. They don’t view this favorably for you. In fact, they use their perceived notion that you might be desperate to negotiate much harder than they otherwise would.
7. OPPORTUNITES LOST FOREVER
All buyers search for homes the same way… they search in price blocks (price ranges). If your house is priced above the fair market range, you will lose a large percentage of buyers who are simply not even looking in the range in which you are priced. If fair market value is in the 250k to 275k range and you price at $280,000 to allow room to negotiate, the fact is that most potential buyers will not even be aware of your house.
In today’s market, most buyers look at about 10-15 homes before making a decision. And most buyers do not look in a limited geographical area because they are looking for a deal. If you are priced even just a little bit too high, you lose the opportunity to attract most buyers.
The bottom line is that setting a competitive price, relative to your competition, is an essential component to a successful marketing strategy.