Overpricing your property doesn't work

 

Sellers lose market time, momentum when priced high

 

HONOLULU ADVERTISER   July 22, 2007

 

BY LISA SCONTRAS

 

Custom Publishing Group

 

It should come as no surprise messy homes that smell bad, are dirty or show signs of neglect are big turn-offs for prospective buyers.

 

“Buyers hate clutter,” says Mary Robb, Realtor and partner at Prudential Locations LLC. “And that is followed by a lack of cleanliness —especially carpet — pet and other odors.”

 

But one mistake by sellers tops the list hands down.

 

“By far the worst thing sellers can do is overprice their property,” says Robb.

 

 

She explains that broker and buyer interest is at its highest when a home is first put on the market — and interest will remain high during the first four weeks. If a property is priced too high during this crucial period, it won’t attract the right buyers. Once the momentum is lost, according to Robb, it’s difficult to recover.

 

“That strategy simply creates the need to reduce the price at a later time to compete with the more competitive listings,” she adds. “Setting a realistic, market-based listing price, on the other hand, ensures that your home appeals to the largest number of qualified buyers. This greater interest, in turn, leads to a better chance of more offers.”

 

Pricing a property correctly requires understanding the current market. And accurate pricing is based on what a prudent person would pay to purchase a comparable substitute.

 

“To evaluate market value, we analyze recent comparable sales activity,” says Robb. “This is called the comparative market analysis or CMA.”

 

There are three factors to evaluate: comparing the home to others that have recently sold; others currently listed; and making any adjustments in the case of extraordinary improvements.

 

Most home improvements will not actually increase the value of the property, but rather they will help the home sell faster compared to others without similar renovations. This concept is sometimes difficult for sellers to understand. They feel that if they spent $X on a project, they should be able to recoup those costs.

 

“Although upgrades are important, buyers may not share the owners’ enthusiasm for — nor agree with — the owners’ value for the improvements,” says Robb. “Installing new carpet, flooring and adding a fresh coat of paint are generally recommended and money well spent when preparing a home for sale.”

 

It is important to understand that a CMA will analyze the price other homes have actually sold for, not just the asking price — there can be a sizable difference. Robb points out the most common mistake sellers make when pricing their property is to only consider asking prices of other listings.

 

“A list price does not suggest market value of a home,” she says. “It is simply the ‘asking price’ or ‘dream sheet’ of another seller and may not be relevant to the actual market value.”

 

She reminds sellers that buyers have access to the same real estate information; that today’s buyers are very smart, they’re cautious, and they’re not willing to pay more than the actual market value for a property.

 

“The amount a seller needs for a replacement property, the cost of improvements, tax assessed value and the original price paid for the home are not important to the buyer,” adds Robb. “Buyers establish value based on different criteria. Their perception of market value is relative to other sales of similar properties.”

 

Pricing a property with a cushion for negotiation is also considered overpricing and carries with it the same consequences of pricing a property too high. The number of buyers is automatically reduced, likewise the likelihood of receiving an acceptable offer is also dramatically reduced.

 

Robb warns sellers not to pick a real estate agent based on who offers the highest list price or the lowest commission. While these are both good tactics to get your listing, they are not a good way to get your listing sold.

 

“No Realtor, no friend, no neighbor can set the market value for your home,” asserts Robb. “Market value is determined by the value a buyer and seller agree upon. Once a buyer and seller agree on a price, the market has spoken — nothing else matters.”

 

 

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