The Chicago Real Estate Minute

Seller myths: How to Fail, Part 2

5 minute read

Seller myths about pricing can be some of the most detri­men­tal of all. Find out what these bogus beliefs are, and why you shouldn’t accept them as truth.

Please read the first post about seller myths here.

A higher list price = a higher sales price

Image by Jill Wellington from Pixabay

What’s the dif­fer­ence between bread and wine, and what does it have to do with real estate? Unlike a fine wine, homes on the market do not get better with age. Think of your home like freshly baked bread — the longer it sits around, the more stale it gets …

Pricing the home exactly where the market sees the value is almost always the best route. There is a real estate axiom that “you can overprice a home, but you can’t under­price one.” If a home is priced above what the market will bear, it’s going to sit … and sit .… and sit … and that racks up market time. 

A buyer who might have an interest in your home looks then sees it has 143 days on the market — what would you suspect they would think?

  • What’s wrong with it?
  • Why has it been on for so long?
  • It’s over­priced
  • I bet the seller’s getting desperate

Buyers inher­ent­ly trust that the market itself will snatch up a deserving home. And it will, in turn, let an over­priced one toil on the market. As a seller, you are always making an impact on a home getting sold — the question is, is it yours or another home?

Overpricing gives you “wiggle room”

Residential real estate offers a view into supply and demand dynamics almost better than anything else. If you believe that over­pric­ing a property is meant to give an extra cushion during nego­ti­a­tions, you have willingly pushed away most serious buyers.

The buyer’s response may be different depending on what type of market it is, but it’s very rare to see an over­priced home sell above market value:

  • Seller’s Market. Due to low inventory, there are likely to be lots of showings, but not too many second showings and few if any offers
  • Balanced Market. With no clear advantage, some buyers may look at the home, but not feel any need to act on it until the price comes down
  • Buyer’s Market. With lots of homes to choose from and not as many buyers to compete with, an over­priced home will just and linger

Why would any buyer in their right mind offer on a clearly over­priced property, knowing they can put in offers on other homes that include more features for the same price or offer the same features at a lower price? And guess what else — you need to maintain the home in “showing condition” for longer since it hasn’t sold yet, something you do get to forego after the appraisal is done.

Image by mohamed Hassan from Pixabay

Many sellers think, “If buyers are inter­est­ed, they can just make an offer. Don’t they know we’re nego­tiable?” No, they don’t. They’re more likely to assume you won’t come off an inflated price and just not bother. Conversely, they’re also more likely to under­stand if you don’t move much from an accurate list price.

By over­pric­ing, you will have accom­plished the exact opposite of your goal, by chasing away buyers instead of attract­ing them.

Another property’s list price helps you

This can be a very dangerous path to travel — looking at the listing price of a similar home in your area, and assuming that will auto­mat­i­cal­ly increase your home’s value. Did it sell at that price? No, it’s just listed at that price. If it sells at that price, it is a different story.

Just because the Jones’ down the street priced their home at x, and their home isn’t nearly as nice, doesn’t make yours (or any other home) worth more. The proof is in the closed comps.

Online evaluations are accurate

Some companies believe they have created algo­rithms that are more accurate than an agent’s property val­u­a­tions. I don’t pretend to know what they include in their formulas, but do know quite defin­i­tive­ly that most of them are more often way off and once in a while are within the correct range. There are numerous articles about how bad these are — bottom line, just don’t use any to define your expec­ta­tion of a home’s value.

Image by Gerd Altmann from Pixabay

Zillow was the first to provide these estimates, and indeed online estimates (however woefully inac­cu­rate) can provide a baseline. Having spoken with many home­own­ers about them, most under­stand that the estimate itself is likely far off, but the changes from month to month offer a gauge on which direction values are going.

Zillow’s former CEO’s own Zillow estimate was off by … wait for itwait for ita WHOPPING 40%! Believe it!

… View the next post about seller myths here

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