Since the change in real estate market conditions, more sellers are competing for fewer buyers. So is important to understand how important pricing your home can be. There are some who believe that the initial listing price is not that important because the price can always be adjusted downward later.
Many homeowners believe this.
The reality is, especially in a slower market, this may end up costing you more money.
While some buyers come to your house because of various types of advertising such as a newspaper or magazine ad, the internet, brochures, or the sign in the front yard, the majority of buyers find your home through a buyer's agent or another real estate office. If a buyer's agent is not involved early on, most of the time they will be at some point in the process. Typically a buyer's agent knows the current inventory well in his or her market and ultimately, they will know if your home is overpriced.
As a result, you need to get other agents interested in your property. This is where your listing agent plays a key role and why a good listing agent is extremely important. The listing agent gets the buyer's agent looking at your home. The best way to attract their interest is by pricing your home correctly; the first time around.
Buyer's agents look at the needs of the client, where the client wants to live, location, condition, and other details of the property. Most importantly they look at price. If your house is overpriced, agents are going to show similar homes that are priced more attractively. In the end, your listing, if overpriced, will pale in comparison to other listings in the same price range that are appropriately priced and get passed over.
In addition, agents pay most attention to homes that are new to the market. One reason is that there are fewer new listings than current listings. It is easier to keep an eye out for what is new, compared to the vast number of current listings. New listings are also on the fliers circulated in real estate offices. The MLS computer identifies new listings. Your listing agent may hire a service to distribute fliers to all the buyer's agents. There are office previews and MLS tours to showcase new listings. A lot of attention is focused on what is new. With agents looking at newly listed homes so aggressively, a properly priced home gets attention. An overpriced home gets passed over.
Buyers are not thinking in advance about how much you are willing to negotiate, even if this was your intention. They are comparing your asking price to other asking prices and to recent sales in the neighborhood. Plus, when your house is new on the market, you may not be willing to negotiate as much as you will later, once you have realized your error. Moreover, it is often true that the first offer may ultimately be your best offer.
So what happens if you overprice in the beginning and get more realistic later? You will not have the same attention from the marketplace that you would have had when your listing was new. A price reduction later in the listing cycle often gets overlooked or is an indication that you are an overly motivated seller. It is just one of many listings, not one of a few new listings.
As time passes, you could actually become anxious to sell because you have accepted a new job or because you have already bought a new home. That is a recipe for receiving lowball offers, so you could end up selling for less than if you had priced the home correctly in the first place. A good real estate agent knows this, but many sellers still mistakenly believe they should "price it high" because they can lower the price later, if necessary.
This has proven to be a less than optimal strategy.
Questions or comments about this article? Contact the author - Mathew Roth