~What Happens When You Overprice The Property You Are Selling?~

May 8, 2019

QUESTION: “What’s the worse that could happen if I price my San Diego property a little higher than the average?”

ANSWER:
I know… I’ll have a little bit more money than I expected and the problem is that I don’t know what to do with the extra money.


Before you supersize your happy meal, or double-up your tacos on Taco Tuesday with the extra money…please keep reading.

 

 

 

3 SIMPLE FACTS

1.  In general, San Diego home-sellers want to sell their property for the most money possible. It is a seller-agent’s (aka listing agent) job to get the seller the most amount of money for that property.

2.  Conversely, buyers try to buy their homes for as little money as possible. Along with that, if a house is overpriced, most buyers won’t willingly overpay for a home just because the seller thinks that it’s worth more than the current market price.

“Some agents will over promise a home seller, just to get the business”

3.  Some listing agents agree to a seller’s outrageous selling price, just to get the business (out of desperation). Therein lies the problem. The home is advertised to the public and nobody buys the home at the super high price.  Now the seller thinks that the listing agent is incompetent or the seller gets desperate and sells below the average price in order to recoup the lost time.

This was doomed from the start and here are 2 factors.

First, the listing agent agreed to an unrealistic sales price, just to get the business from the home seller. From the get-go, this is unfair to the seller because it does not set them up for success. No matter how much time, advertising money, or effort is put into a property; buyers will generally know an overinflated price and not waste their time to try to negotiate a lower price with an unrealistic seller. The result is that the property is marketed to the buyers, but nobody comes to the home to write an offer and the seller is left with wasted time and a wasted mortgage payment because they were not able to move on to their next property. Overpricing a property increases the chances for this disappointment, loss of time, loss of money, and eventually failure. Besides, if the listing agent can’t even defend the price they formulated, how can anyone feel confident in this agent when it comes to negotiating a stronger offer from the buyer’s?

Secondly, properties in similar price ranges tend to be grouped together. Because the home is being marketed above it’s “price group”, it creates a disadvantage for the advertising program. For example, if a one-million dollar starter home were to be marketed against a one-million dollar ocean-view mansion with 3-car garage, which house do you think a buyer would buy? The mansion would win 99% of the time! Due to this difficult challenge, a home seller will most likely become frustrated because (again) NO buyers are visiting the property.

 

So how do we “right the ship”?

ARE THEY PRICING YOUR HOME CORRECTLY: A regular agent should know the market and will present the data to you. A”good agent” will help you interpret the local housing data by looking at past sales, the “active” homes for sale, and then setting up your marketing plan to get you the best results. Of course background, testimonials, and references are always important too.

Real estate experience also reveals a surprising truth: Buyers determine the “true” value of a home despite what the seller’s think of the home price. Why, you ask? Because nobody can force a buyer to buy a home. If a seller overprices a home, the buyers will simply “choose” to NOT write an offer that is above their comfort level.

IT COMES DOWN TO LOGIC VERSUS EMOTION: Buyers know that they can pick and choose which home they buy.  They use logic between features, benefits, and price to see which homes are overpriced, underpriced, or are properly priced. In contrast, home sellers have so much vested time and money in their homes, that they emotionally believe that their home is worth more than what the market is dictating.

HONESTY: Now, is your prospective listing agent (aka seller-agent), clearly showing you what the San Diego housing market is doing? Are they helping you figure out a realistic sales price, based on historical data and mixing in your home’s unique qualities (condition of home, location, demographics, etc)? Is your agent “reading between the lines” by interpreting the sales data but also researching the terms/conditions that feed the data? By being a professional and being objective, your agent should help take the emotion out of your sales price and setup the marketing plan that is most effective.

Yes, there is a lot more to being a real estate agent than just opening doors, counting bedrooms, and putting a sign in the yard. It’s a matter of research, strategy, negotiation, and psychology all rolled into wearing that REALTOR logo.

ONE LAST THING: Before you hire your listing agent, look them straight in the eye and ask them “Will you be honest with me and tell me the truth that I may NOT want to hear?”, especially about price.

CC image credit w/attribution: https://www.flickr.com/photos/tales2astonish/