Converted from paper version of the Broad Ripple Gazette (v04n16)
The Word on Real Estate - Advice from a Pro: By Clark Giles
posted: Aug. 10, 2007
Price Your Property to Sell!
Is there harm in trying to sell for a higher price in the beginning if you are willing to lower your price later? Real estate gurus across the US agree that we are still experiencing a "buyers' market" and that there are more homes currently on the market than in almost any other time in history. Pricing your property to sell or at least having a price reduction plan in place is essential.
With 80 percent of today's homebuyers doing their initial search for a home on the Internet and being able to click on comparable homes from their dining room table, overpricing a home may cause an anxious buyer to skip over yours in their search. Overpricing your home, for instance, by $10,000 may put your home in a different "maximum" search criteria and a buyer may never even see your home on the Internet if they fail to search for homes that do not fall within their desired search criteria of minimum and maximum pricing on most real estate websites. You and your agent may know that you will sell for less, but the buyers will not. Fiduciary duty prohibits your agent from telling them this or advertising the fact and your overpriced property may not get shown to ready and able buyers.
Surveys show that the longer a house is on the market, the greater is the discount from listing price when it finally sells. The overpriced house lingers on the market, requiring a price adjustment before it attracts a buyer.
"We can always come down" is a phrase most agents don't enjoy hearing. With today's advertising cost rising, overpricing your home for an agent means a slower start and money spent on advertising a home that, because of overpricing, won't attract a fair number of potential buyers and showings. Then there is always the dread of unpleasant discussions with the homeowner about when and how much to reduce the listing price and, eventually, a property becomes shopworn. Knowledgeable buyers ask how long a house has been on the market and why it hasn't sold. Even when the agent explains that only the price was wrong, buyers may remain suspicious. And, if a buyer is being represented by an experienced real estate agent, the agent will inform a buyer how long a property has been on the market when they are talking about a price to offer.
Setting a written plan to drop the price at different intervals avoids some of the frustration if you have your heart set on trying a higher price "just to see." For instance, in two weeks, if you have not had enough attention, then drop the price to an agreed amount. Two weeks later, cut the price again if the action is still slow to reach real market value and continue for six weeks. A commitment at the beginning ensures a logical, stress-free handling of the problem and six weeks to reach fair market pricing is explainable rather than waiting 120 days and then wondering why someone thinks it has not sold for reasons other than pricing.
But let's say that you do price your home higher and maybe an out-of-town buyer, unfamiliar with the market, agrees to pay your inflated price. You may still have a problem when the appraisal is done. You and the buyer may have agreed that the house is worth $249,000 but if the bank appraiser doesn't agree, the mortgage loan will be offered on the basis of the appraised price, and the buyer may not be able (or more likely, not willing) to complete the purchase.