Why You Should Price Your Home Accurately Instead of “Testing the Market”
by Ben Nicolas
on Thursday, August 27th, 2020 at 10:34am.
Many are tempted to "test the market" by pricing their home higher than it's worth. Sellers think, "if it works and someone buys the house, great! If not, no big deal, I'll take the lower offer." But in these times, there probably won't be a neutral outcome, instead, overpricing your home can actually have a negative affect.
Today, real estate professionals consider the strategy of testing the market to be dead and done with. Here's why you should price your home accurately:
You Guessed It...COVID-19 is a Big Factor
New safety measures to protect buyers and agents from coronavirus have created a lot more hoops to jump through if you want to check out a house for sale. You have to set up an appointment, fill out disclosures, and submit preapproval letters. The extra time commitment has caused buyers to be a lot pickier about what houses they choose to see in person.
Gone are the days when people might spend a Saturday driving around to open houses, choosing to see a house they're a bit skeptical about just because it's close to another home they're visiting. Buyers are methodical about which houses they see, and if they notice your listing is overpriced, they'll write it off completely because they don't want to waste the time.
Buyer’s Today Are Savvier Than Before
Before the internet, the average buyer had limited knowledge of market data, and learning more wasn’t easy or convenient. Agents were usually the only source they had to find out that information. Now, buyers can use automated valuation models (AVMs) to gauge prices. At the very least, they use sites like Zillow or Redfin to check out comparable properties in the area to get an idea of what range of pricing seems appropriate. If buyers notice you’ve overpriced the property they might make their own assumptions about the seller (they’re unreasonable, unrealistic) and decide to move on to the next property.
A Low Appraisal Could Take You Back to Negotiation Table
Maybe you get lucky, and a buyer doesn't notice that you've inflated the price as much as you have. They love your house so much they have blinders on.
If they're paying in cash, you're good to go; you tested the market and it worked!
But if they're taking out a mortgage... you've got another obstacle to clear. All loan transactions have to go through an appraiser, and if they come back to the buyer with a much lower value, that could be a problem. The buyer might decide to use their extra cash on hand (if they have it) to make up the difference, but there's a very good chance that they'll just try to renegotiate the price.
Overpricing Will Make it Sit on the Market Too Long
Agents and buyers will notice that your home is overpriced, which will likely deter them from bothering to even see the place. Now your house has been on the market for a week... then two... Suddenly, you're not "Just Listed!" anymore.
People pay attention to the average days on the market (DOM) for the area where they're looking. As your DOM inches farther and farther away from that average, your bargaining leverage begins to dwindle. Buyers will either continue to assume it's overpriced or worse, they'll assume that something's wrong with it. People might make an offer, but it will probably be a lowball. And if you're desperate, you might just have to take it.
Right now, lots of sellers are finding their homes in the middle of a bidding war. When your house is priced appropriately, you'll get more offers right away. That kind of interest will make buyers view the home as a commodity, and making them more likely to make a bigger offer. You could end up with the higher offer you wanted in the first place, just by pricing it appropriately from the get-go.
Now is a Great Time to Sell Your Home
Despite the pandemic, now is still a great time to sell your home. There's a big demand for housing, but not much supply, so if you were worried that you wouldn't get what your house is worth because of the economic downturn, erase that fear from your mind. If you're looking to sell your home in the greater East Hollywood or surrounding areas, email us or gives us a call at (323) 412-9060.