So, how does one come up with the correct price? Most people start by calling several REALTORS. Each REALTOR prepares a comprehensive Market Analysis and they each recommend a specific sales price.
Many times a couple of the REALTORS will have similar prices that you may not be too happy with. Your home must certainly be worth more and you suspect the REALTORS are low-balling your home for an easy sale. Then there’s the third REALTOR with a much more pleasing number. Now this person seems to know what they’re doing. In fact their number is very close to what you anticipated. Finally, you found your expert.
The question is, which REALTOR do you choose?
If you’re like many people, you’ll choose the REALTOR with the highest price estimate. This is the agent that’s really listening to you. Why not start out with a price that has some wiggle room. This way, you can drop the price later on if you need to. After all, this is what most sellers do isn’t it?
If you think this is good logic, think again. Putting your home on the market at too high a price can actually net you less money in the end. Here’s why: With a correctly priced home, the first few weeks on the market is when you’ll see the most activity. Buyers and their agents will be checking out the new inventory (your house.)
If your house is overpriced few prospects, if any, will be looking at your home. It’s not likely you’ll be able to convince the other agents in the community that your home should somehow be worth more than comparable homes in the neighborhood. Remember, the agents representing the buyers are professional home buyers and they know local market conditions, this is what they do every day. If your house is overpriced they will not waste their time showing it. Furthermore, they don’t want to risk hurting their credibility with their coveted buyer. Their time is better spent showing homes that are priced realistically.
By the time you realize the problem and you’re done testing the market, you may decide to drop your price. At this point you are usually too late as your house is “old news.” It’s rare you will ever recapture that flurry of initial activity you would have had with a realistic price.
In another scenario, let’s say you do find a buyer willing to pay your price because they love your home as much as you do. Generally speaking, the buyer will need to obtain a purchase money loan. The lender requires an independent appraisal of value before the loan is made to the buyer. If comparable sales and current market conditions don’t support your sales price, the house won’t appraise and your deal will fall apart. Of course you can always attempt to renegotiate the price, but only if the buyer is willing to listen. Your house could go “back on the market.”
Should your home fall out of escrow or if you’ve been waiting for an offer for the last 60 days or more, it will be much harder to get a good offer. Potential buyers and real estate agents will think you may be getting desperate and may make lower offers. By overpricing your home in the beginning, you could actually end up settling for a lower price than you may have received otherwise.
In conclusion, going with the REALTOR that suggested the highest listing price is a very human mistake based on hope. It’s only natural to hope for the highest and best offer when selling your home. To avoid this mistake, set an appointment to sit down with the real estate agent of your choice and actually view the multiple listing data and competing properties currently on the market. You will most likely go to the agent’s office and view the Shasta County MLS data directly from the agent’s computer. This will take an hour or more of your time but will pay off with a faster sale at the highest possible price. As with most things in life, trust but verify.