Three Ways An Inflated List Price Can Kill Your Home Sale

The real estate market tends to slow down at the end of the summer and going into the fall.  Buyers get out of the summer vacation mode and into the back to school mindset.  They also realize that they may have to start their children in one school district and uproot them part way through the school year.  Picking the wrong list price when selling your home can hurt you in three different ways. 

First, neighborhoods tend to be very homogeneous.  With the MLS data flowing into websites like Zillow and Redfin, buyers have access to recent sales data.  They educate themselves and become experts in their area and price range (similar to how you become an expert when shopping for a bigscreen TV or car).  Buyers can sense when a home is overpriced.  In a hot market, overpricing may not matter.  But, as the market slows, this can have a huge negative impact.  Sellers mistakenly believe the list price is the starting point in the negotations and a high price allows them to come down later.  Actually the starting point in the negotiations is when a buyer makes an offer.  If buyers come to view your home but elect to put an offer on another property, you have nothing to work with.  The list price is actually a key component of the marketing to generate offers.

Related to the previous paragraph, is a concept called “stagnation”.  A home is like a loaf of bread.  People love to get a loaf of bread fresh out of the oven.  It is nice and soft and has a great smell.  But, as a loaf of bread sits on a shelf and gets closer to its expiration date, buyers’ enthusiasm dies off.  They prefer to pick the loaves of bread that are fresher.  Once you lose buyer enthusiasm, the only way to get them to purchase a stale loaf of bread is to offer a price reduction or if all the fresher loaves of bread have already sold and they have no other choice than to purchase the stale loaf of bread.    

A third way an inflated list price can hurt involves the home appraisal.  Before the bank will fund the buyer’s loan, they will send out an impartial appraiser to ensure the home has adequate value.  If the buyer stops making payments on the loan like what happened during the Housing Crash, the lender will have to take the home back.  The bank wants to make sure there is adequate value in the property to protect themselves.  This can kill a deal if the bank determines there is not adequate home value to support the size of the loan they plan to provide.  When this happens, either the buyer has to make a bigger down payment and/or the seller has to reduce the sales price.

This is still a great time to sell a home.  But, you have to be careful when selecting your list price.  A spot on list price will attract buyers.  When they view your home as the most attractive of the homes available for sale, they will make an offer and start the negotiations.  Good luck with your sale!