A detrimental mistake that many sellers make when listing their property on the market is inflating the asking price. Sellers often ask for a higher amount to give themselves a cushion during the negotiation process.
A seller may have a certain amount that they would like to get out of the sale of the property. Anticipating that prospective buyers will put in lower offers than the initial asking price, sellers often inflate the price of the home to counter this and still get the price they wanted. However, the problem is that if a property is overpriced, it will have limited appeal among buyers. Buyers won’t take the time to view a property that they deem to be overpriced and would rather look at homes priced at what they deem to be reasonable market value.
Emotional attachment is another reason many sellers over evaluate their property. Homeowners who have lived in their home for many years and have put a lot of time, money and effort into making it their own, will feel that it may be worth more than the market dictates. Emotions often lead sellers to see their home as having more value than other properties in their area. However, buyers won’t have the same perception of the property.
While the price is not the only factor that buyers consider, homes that are priced correctly at fair market value will appeal to a larger target market and won’t be on the market for very long. When buyers are comparing properties that are in the same area and offer similar features, price becomes the number one factor that will influence their decision-making process.
With the number of properties available on the market showing signs of growth, sellers that over price their homes are taking themselves out of the game in the current competitive environment. Homes that sit on the market for long periods of time lose their appeal and sellers are eventually forced to lower their prices anyway. In many cases, sellers are eventually selling their homes for a lot less than what they would have received if the home was priced correctly at the start.
According to data, homes priced at fair market value sold within the first 42 days of being listed. Homes that are on the market for around five to 12 weeks sold for 3% less than the asking price, 13 to 24 weeks for 6% less and houses that were on the market for 24 weeks or more sold for more than 10% less.
The question is, how does the seller know that their asking price is market-related? A real estate professional will be able to guide the seller through the process of correctly pricing their home. An estate agent will be able to provide the homeowner with a comparative market analysis (CMA), which will give them an accurate indication of what other homes are selling for in that specific neighbourhood. Factors included in a CMA are the average price per square metre in the area, recent sales prices of similar homes and comparative prices of other properties that are still on the market. This information will help establish a reasonable price bracket for the property.
Once the correct price bracket is determined, an agent will then be able to consider what features or unique qualities could set the home apart from others in the area to give a more accurate gauge of its value.
Market conditions will have a massive influence on the estimated value of the home. Sellers will need to adjust their thinking to relate to the current market. Sellers will need to ensure that their property is priced accordingly or run the risk of watching the market from the sidelines.