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The impact of overpricing
Often times, sellers may think that their house is never going to sell for full asking price, so they price it higher to begin with. Sounds like good logic, right? Wrong. By thinking that you'll never get full asking price, you can set yourself up to create other barriers and struggles during your listing period. And, depending on market conditions, you CAN in fact, sometimes, get a full price offer for your home (especially when priced right in the first place).
Here are some examples of how overpricing your house can end up hurting you in the long-run:
- Overpricing helps your competition sell their houses. Think about it; if your house is the most expensive one in the neighborhood, why would potential buyers want to purchase your house over a similar, lower priced home?
- It also eliminates potential offers. When you overprice your house, buyers looking in a particular price range will not even find your house on any online searches. Generally speaking, when searching online, buyers almost always put in a set price range. If your house is probably worth $200,000, but you list it at $220,000, all buyers who are looking for homes up to $200,000 won't ever even see your house on the search results.
- It can cause appraisal problems. Most buyers will have to have an appraisal as a part of their loan conditions, and if the appraisal comes in drastically lower than the agreed upon offer price, that could result in the buyers terminating the contract if they don't have the extra funds to cover the additional costs.
- It extends the time spent on the market. Potential buyers may see the house and like the house, but don't like the asking price, and will move onto another, better priced property. Others may simply just not even bother to look at it, waiting for a price reduction to occur before moving forward.
- It can also incur additional costs over time. The longer the house stays on the market, the longer you have to keep paying taxes, insurance fees, HOA fees and utility bills, thus costing you more money in the long run.
- It can create a stigmatized notion about the house. Buyers may assume that something is wrong with the house, otherwise it would have already sold by now, and therefore cross it off of their list.
- It encourages low offers. Buyers may view the house and know it is overpriced and will submit a low offer. This can create additional negotiations between both parties to reach an agreeable price. You may even spend so much time negotiating that you end up with far less than what your ideal agreed upon price would have been. And even if you reach an agreement with the buyers on price, the terms could still change or be renegotiated after the inspection, if there is significant work needing to be done on the house.