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Selling your home is a big step, and naturally, you want to get the best possible price. It’s easy to think that setting a high asking price will lead to a higher sale, but sometimes, overpricing can actually work against you. As you consider how to price your home in Boulder or Evanston, this Redfin real estate article explains the dangers of overpricing your home.
The initial excitement fades
When your home first hits the market, there’s a window of opportunity where it generates the most buzz. Buyers and agents are always on the lookout for new listings, and if your home is priced competitively, it will attract a lot of attention. However, if the price is too high, many potential buyers might skip over it entirely, assuming it’s out of their budget or not a good value. This means you miss out on that initial surge of interest, which is crucial for a quick and successful sale.
Stagnation and price reductions
Homes that are overpriced tend to sit on the market longer. As days turn into weeks, and weeks into months, buyers start to wonder why. They might assume there’s something wrong with the property, even if there isn’t. This can lead to your home becoming “stale” on the market. When you eventually have to drop the price, it often signals to buyers that you’re desperate to sell, giving them leverage to negotiate even lower.
The appraisal hurdle
Even if you find a buyer willing to pay your inflated price, you might face another hurdle: the appraisal. Lenders require an appraisal to ensure the home’s value supports the loan amount. If the appraisal comes in lower than the agreed-upon price, the buyer’s lender may not approve the mortgage for the full amount. This can cause the deal to fall through or require you to reduce the price significantly, leading to frustration and delays.
Missing out on the right buyers
Every home has a target audience. Overpricing can push your home out of the search parameters for buyers who would be a perfect fit. For example, if your home is truly worth $400,000 but you list it at $450,000, you might miss out on all the buyers searching in the $375,000 to $425,000 range. These are the buyers who are most likely to appreciate your home’s value and make a solid offer.
The cost of holding
The longer your home sits on the market, the more it costs you. Think about ongoing mortgage payments, property taxes, insurance, and utility bills. These carrying costs can quickly add up, eroding any potential profit you hoped to gain from a higher asking price. Sometimes, a quicker sale at a fair price can actually put more money in your pocket in the long run.
What to do instead
To avoid these dangers, it’s essential to work with a knowledgeable real estate agent who can help you determine a realistic and competitive price for your home. They will conduct a comparative market analysis (CMA), looking at recent sales of similar homes in your area. This data-driven approach will help you set a price that attracts buyers, generates offers, and ultimately leads to a successful sale.
Frequently asked questions about overpricing a home
Learn how to avoid overpricing your home so you don’t come out of the deal getting less than you deserve. Take a look at what others are asking about the dangers of overpricing a home.
How do I know if my home is overpriced?
Your real estate agent can provide a comparative market analysis (CMA) that shows what similar homes in your area have recently sold for. If your asking price is significantly higher than these comparable sales, it might be overpriced.
What happens if my home doesn’t appraise for the asking price?
If the appraisal comes in lower, you may need to reduce your asking price to match the appraised value, or the buyer might need to cover the difference in cash. If neither happens, the deal could fall apart.
Is it better to price my home slightly under market value?
Sometimes, pricing slightly under market value can generate multiple offers, potentially driving the price up. This strategy can create a sense of urgency and competition among buyers.
How long should my home be on the market before I consider a price reduction?
This can vary by market, but generally, if your home isn’t getting much interest or any offers within the first few weeks, it’s a good time to re-evaluate the price with your agent.
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