The Internet has empowered all buyers with information and homebuyers are no exception. The amount of information available to the public includes details on size, condition, sales history, current inventory, recent sales, photographs, videos, school info, drive-times, entertainment and much more.
When a seller realizes that buyers are educated with facts, it becomes unlikely that they will pay more than a home is worth.
If a home is priced too high in the beginning, it may stay on the market longer than normal which could adversely affect the ultimate sales price. It is a natural reaction from people, personally or professionally, to assume that something must be wrong with a home that doesn't sell in a reasonable time for that market.
The seller is entitled to maximize the equity in their home and pricing it properly, in the beginning, is the best way to achieve that. Overpricing can reduce buyer's activity because they assume that the best homes are purchased soon after they are offered for sale and if one has been on the market longer than normal, there must be a problem with it. Similarly, sales associates may come to the same conclusion.
After buyers have seen a few homes in a certain price range, they begin to expect similar amenities in each home they look at. If a home is overpriced, it will not compare favorably with the other homes that are being viewed. Sometimes, the buyer may even think that another home could be a bargain because it offers much more for the same price as the overpriced listing.
Shopping the market means looking at the homes that meet buyers' wants and needs and selecting the one that gives them the most, whether it is in price or amenities. The overpriced listing doesn't compete well, and it extends the market time. There is a documented study that shows that the longer a home stays on the market, the lower the price will be.
It is essential that a seller receive factual information to price their home to compete favorably in the current market. Some of the obstacles can include:
1. Failure to objectively compare the current and sold homes with theirs
2. Neighbors who mislead the seller as to how much they got for their home
3. Fear of making a mistake and thinking they can start high and always lower the price
4. Loss of perspective because the seller is emotionally involved
5. Expecting the home to sell for more than fair market value because they need the money
6. Agents who will accept a listing at any price in order to tie up the property until the seller realizes the price is too high
7. What a seller paid for the home or the cost to rebuild it today does not affect market value. Neither does the amount spent by sellers on certain improvements that were made for their own pleasure and enjoyment.
It is unrealistic to expect a buyer to pay more than market value for a home. The seller sets the price of a home but the buyer determines the value. If the home is priced properly in the beginning, it is more likely to sell for a higher price, in a shorter period and with fewer problems.