Hey everyone! Check out my new article on "Leaving Room to Negotiate".

The Dangers of Overpricing your Home – Part 1

In today’s difficult real estate climate, the most important criteria for getting your home sold is pricing it correctly. Overpricing your home is the #1 reason that properties don’t sell.  In a city like Los Angeles, there are thousands of buyers in each zip code, and at the right price, there is ALWAYS a buyer for every home.  This is a fact.  If the home is staying on the market for a long time, it’s not because there aren’t any buyers, it’s not because the countertops aren’t made of granite, and it’s not because the agent doesn’t wear a suit, or has bad breath…it’s because the home is overpriced and the buyers rejected it at that price.  It often seems complicated, but it is actually very cut and dry.

It is the job of a strong real estate agent to do the research, use their experience, and know the area well enough to price your property correctly.  In this 4 part series, we will explore the most common pitfalls of overpricing your home.

Part 1

“Let’s list high and leave room to negotiate." 

Sellers often overprice because they are emotional about their house. There are no hard rules for how much you list for, so some people list high, at an unreasonable price, because they think their house is the best house in the neighborhood.  I certainly understand the train of thought...when you have put a lot of time, effort, money, and love into your home, it makes it really difficult to be objective.  They often think “This is house is so amazing and so much better than the rest!” and, “Let’s list high and leave room to negotiate."  This line of thinking is hugely detrimental to getting the property sold, and it is the job of the agent to try to gently help the client understand the realistic value of their home, emotions aside.  The market is unemotional, and it is the market that ultimately decides the value of your home.

So how do you get an unrealistic and emotional seller to see the light?  This is much easier said than done.  Strong agents often simply won’t take overpriced listings because it can be such an ordeal to handle an unrealistic seller. These relationships can be fraught with friction and a lot of extra work for an end result that is probably going to disappoint the seller…that is, a market price.  Unrealistic sellers often think that when their agent tells them their house is not as valuable as they think it is, he/she must be against them and are trying to undersell the house to sell it quickly.  The truth is, the quicker the sale, the more emotional the buyer, the more emotional the buyer, the higher the price.  The strong agent is actually doing a great job PROTECTING the seller’s value and profits by encouraging them to list at the price that will get it sold sooner than later.

How do Listings End Up Overpriced?

Weak agents often take overpriced listings because they usually don't have very much business.  Because they don't have much business, they have time to deal with the hassle of unrealistic sellers.  Meanwhile, unrealistic sellers choose weak agents because they agree with their price.  Weak agents don't warn them upfront about this because they are afraid to tell them.  The agents don't want to create friction with the seller, and are afraid the seller won't hire them if they argue.  And they are often right…they won't be hired if they tell the sellers the true price.  Since they need the business so badly, they opt to let the market educate the sellers.  What do I mean by that? They say to themselves, “ I'll list it for THEIR price, and then when it doesn't sell, that will prove to them that the price is too high.”  This can become a very costly decision for the sellers, however, because they have now delayed their sale, potentially lost thousands in holding costs and market returns, and lost vital momentum for the sale of their property.  In the end, the inevitable still occurs.  Those sellers don't get their properties sold until they do a price reduction or two.

I have seen first-hand  sellers lose hundreds of thousands of dollars ultimately by sticking to an unrealistic price, only to be forced to sell 6-12 months later at a much lower price due to holding costs and market drops.  Remaining unemotional about your property and being realistic about what the market is currently dictating regarding price is ESSENTIAL to getting your property sold in a timely manner.

CHECK BACK NEXT WEEK for the next part of Erik’s 4 Part Series on home sales!