Three major factors that affect the sale of real estate are price, location, and condition…with price usually playing the most significant role (as price can be adjusted in consideration of location, condition, and current market conditions).
Generally speaking, a property is worth whatever amount a buyer is willing to pay for it on the open market compared to other available properties. However, property appraisals also often come into play (a bit more on appraisals later).
The amount owed on a property or the amount a seller wishes to net at closing has no effect on the actual market value of a property, as these items do not factor into buyers’, lenders’, or appraisers’ perception of a property’s value versus other comparable properties.
Our goal is always to sell your home for the highest amount possible within your needed timeline, and we will always give you our honest assessment of your property’s value based on the current market and recent comparable sales. Although you are 100% in the driver’s seat when it comes to pricing your home, it is important to note that overpricing your home can lead to some major challenges and headaches.
The Effects of Overpricing Your Home
Lack of interest
Buyers and their agents will compare your property to others they are looking at and also to comparable properties that have recently sold. If they perceive your home as being priced too high in comparison to others, they will focus on those other properties and simply disregard yours as overpriced. Many buyers will not bother to request a showing on overpriced listings…and you can’t expect an offer on your property without getting feet in the door first! No amount of marketing or salesmanship can convince a buyer to pay more for a property than what the current market indicates it is worth. Remember, you only get one shot at a first impression, and pricing reasonably will give your listing the best chance of making the best first impression with the largest number of potential buyers.
Increased time on market
A lack of interest from buyers and a lack of showings will increase the amount of time your property remains on the market unsold. If your property sits on the market while similar properties go under contract, buyers and agents will begin to wonder if there are issues other than just price that are keeping your home from selling. Additionally, if you are on a specific timeline of when you need to sell, this increased time on market can eventually put you under a time crunch and possibly make significant price reductions necessary to generate an offer. This is not a good situation for a seller to be in!
Not only will overpricing dissuade buyers and increase the length of time a property sits on market, but it can also create challenges during the property appraisal. Lending institutions will not lend more on a property than its fair market value, so they normally require a professional home appraisal as part of the loan terms, and cash offers can also be contingent upon a home appraisal. This means that the appraised value of the property must be equal to (or above) the purchase price specified in the contract.
To determine a property’s fair market value, appraisers compare the subject property to recently sold comparable properties (comps), and they must use the most recently sold comps that are most similar to the property being appraised. Values are then adjusted to account for variables like square footage, number of rooms, age and condition of the property, and more.
In short, appraisers must be able to justify a property’s price using real market data, and if a property is overpriced they will be unable to do so.
Price for Success!
The best practice is to price your home right in line with fair market value to drum up as much buyer interest as possible right from the start. This also gives you the best chance of generating competing offers from multiple buyers. At times multiple offers can even drive the purchase price above list price if the property is priced reasonably.
We will assess our pricing and marketing strategy every couple of weeks, and you are of course free to adjust the list price at any time.