What Does it Mean to “Overprice” Your Home?

What Does it Mean to “Overprice” Your Home?

When you’re deciding to sell your Breckenridge-Frisco area home one of the most important decisions that you’ll make is setting the asking price. Why is this such an important part of the home selling process? And what does it mean to “overprice” your home? 

If your home is priced significantly higher than comparable homes in your local market it will be perceived as being overpriced. When potential buyers think that your home is priced too high you will get fewer showings, and fewer showings mean fewer buyers interested in purchasing your home. Your home may sit on the market longer than other homes in your area. This could raise red flags for potential buyers and cost you more to maintain the property while waiting to sell. This all sounds pretty bad, right? A common rebuttal is “I can always drop the asking price if it doesn’t sell in a month (or three, or six)”. And, while this is true, there are definitely downsides to adjusting the price.

Every seller wants to get the best price for their home. But it’s also important to be aware of the potential issues you could encounter if the home has been overpriced. 

Problems Encountered When Overpricing a Home

Even an overpriced home that is new on the market will generate some curiosity in the real estate agent and buyer community, but an overpriced home will attract less and can lose the benefit of initial market momentum. An overpriced home also provides justification for a competing home’s value. A buyer might say, “I like them both, but house #2 is much less expensive.” 

In general, you can get away with or try a price point that is slightly above the average market (up to 10%) and still get some interest and showings, but activity will generally drop off significantly if the price is higher than 10% above the average. 

Another thing to keep in mind is that overpriced homes typically do not appraise. This means that, when appraised, if the home is valued below the agreed-upon price the bank will not loan on the property. At this point, the buyer has two options; to terminate the contract or increase their cash down payment to make up the difference. 

90% of all homes that do not sell are priced unrealistically high compared to the market and other options. While we all have an emotional attachment to our homes it is important to be realistic when setting a price. 

Listen to the Market and Act Accordingly

What is the market telling you? What has the feedback been from other agents and buyers? If your agent can go back and summarize this information for you, there is probably a common theme. Either your home is not appealing, or the price is too high, or both. Have you had any offers? If none, you are probably way overpriced. So far overpriced that a buyer feels like it is a waste of time to even submit an offer because of the gap between what their offer would be and your asking price. 

If you have gotten offers that you turned down, go back and look at those offers. What were the market values at the time? The market will likely have changed since then, but you can extrapolate what the proper price might be for your home. A good real estate agent will know the local market and understand current trends and cycles. This knowledge is invaluable when deciding on a pricing strategy for your home. 

Local Market Experts

A good real estate agent who knows the local market may be able to increase the negotiated price of your home by up to 5%. But they will remain realistic. Savvy real estate agents may choose not to agree to list a home that is overpriced. Real estate agents are paid commission, but only when a home sells. Good agents understand the market and the value of their time. They do not want to waste their time, effort, and money marketing a listing that is overpriced. 

A great real estate agent will not encourage overpricing when selling your home. In fact, they will likely try to talk you out of it for the reasons listed above. Despite this, some agents may be open to working with you if there is an agreement on a price adjustment schedule. 

What Should You Do With the Overpriced Home?

You either need to reduce the price to meet the market; or add value to the home to make it more desirable (which is not easy to do). The good news is that it is never too late to lower the price to meet the market and see the activity of showings and interest increase. It’s important you have a realistic perspective that if you don’t see the activity in terms of showings, and positive feedback, then you need to be prepared to reduce your price or wait for the market to rise to your price. 

How Can I Help?

I hope that you’ve found this information on what it means to overprice your home useful. If you want information on what the Breckenridge-Frisco area Real Estate Market is like right now don’t hesitate to reach out. I can provide you with a detailed market report

My goal is to provide my clients with relevant and up-to-date information that pertains to the local area and real estate topics. 

Scott Lerner
Managing Broker
Coldwell Banker Mountain Properties

970-390-6770
scott@scottlerner.com