Amazingly, a couple of the Realtors have come up with prices that are lower than you expected. Although they back up their recommendations with recent sales data of similar homes, you remain convinced your house is worth more. When you view the third agent’s figures, they are much more in line with your own anticipated value, or maybe even higher. Suddenly, you are a happy and excited home seller, already counting the money.
But which Realtor do you choose?
If you’re like many people, you pick Realtor number three. This is an agent that cares about putting the most money in your pocket. This is an agent that is willing to start out at your price -- and if you need to drop the price later, you can do that easily, right? After all, everyone else does it!
The truth is that Realtor number three may be quite doubtful that your home will actually sell at that price, but is suggesting the higher price just to obtain the listing. Or the Realtor may be well-meaning but feels pressured to agree with your inflated perception of the home's value.
Whichever the case, if you start out with too high a price on your home, you may have just added to your stress level, and selling a home is stressful enough.
There are a lot of factors at work during the sale of a home that sellers may not think about. For one, the listing agent does not usually sell your home to a homebuyer. That isn’t very efficient. Yes, listing agents do advertise to the general public, but they also market and promote the home to the other local agents who are working with buyers. This dramatically increases your personal sales force.
When your home is initially listed, it appears on the MLS "Hot Sheet" where Realtors are always looking for fresh new deals. During the first couple of weeks, the home is often a flurry of activity with buyer’s agents bringing their clients to view your home. If the price is right.
If you and your agent have overpriced the property, fewer agents will bring clients to view your home. After all, they are Realtors, and it is their job to know local market conditions and home values. If your house is dramatically above market, why waste the time? Their time is better spent previewing homes that are priced realistically.
Later, when you drop your price, your house is "old news." You will never be able to recapture that flurry of initial activity you would have had with a realistic price. Your house could take longer to sell. And as your home's DOM (days on the market) increase, everyone will assume that something is wrong with the property or that it is overpriced.
Even if you do successfully sell at an above market price, your buyer will need a mortgage. The mortgage lender requires an appraisal. If comparable sales for the last six months do not support your sales price, the house won’t appraise. You deal falls apart. Of course, you can always attempt to renegotiate the price, but only if the buyer is willing to listen. Your house could go "back on the market."
Once your home has fallen out of escrow or sits on the market awhile, it is harder to get a good offer. Potential buyers will think you might be getting desperate, so they will make low offers. By overpricing your home in the beginning, you could actually end up settling for a lower price than you would have normally received.
It is human nature for you to want the highest price for your home. However, when you insist on pricing your property too high, or choose the agent just because he or she promised the highest price, it could take you longer to sell your home. And you might end up selling at a lower price instead.
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Realtor vs. "For Sale By Owner"