GREATER TORONTO AREA REAL ESTATE BLOG
Selling? Risks of overpricing your home
Why you shouldn’t be overpricing your home
While on the surface it might seem that overpricing your home is a good idea, the results show otherwise. Yes, when it comes to buying and selling Real Estate, negotiations are a crucial part of getting the right deal in place for the seller and the buyer alike. Some people, however, mistakenly believe that by having a property overpriced will give them more bargaining power when it comes down to negotiating the dollar amount. WRONG! The best bargaining power comes from MULTIPLE OFFERS, which you will NEVER attain if you overprice your property.
Consequences of overpricing your home
Let’s assume a townhouse on 123 Main st. is worth $410,000 based on comparable properties that were sold recently in that neighbourhood and all ‘specs’ being the same. The seller decides to post his property for $439,000, thinking that he will ‘test’ the market at that price while having $30,000 negotiating room. Odds are this property will sit on the market for 30 days with only a few showings, then 60 days will pass with no luck… During that time average buyer who sees a property listed on the market for over 30 days starts to question whether there is ‘something’ wrong with the property. Others will forget about it and look at alternative options. 60 days later, here comes the price reduction! If it’s done as a new listing (hopefully that is what your agent would do!), then you minimize the damage to some extent. However, most of those who have seen it, already know your home, and it will often be overlooked by a majority unless you master an aggressive price cut. Thus, more exposure lost!
High Price is Your Worst Exposure Buster
The worst thing about overpricing your property is the exposure that you miss out on. Let’s say you listed that same townhouse for $399,000. That listing would be reaching all the people and agents who are searching for properties on MLS/Realtor for under $400,000. This is a common search denominator for agents/buyers who are searching for a property based on their budget. By posting it $10,000 below market price you would be driving a lot more traffic to your home. New Listing combined with a Competitive price will increase your chances drastically. The right plan here would be about a week of showings before accepting any offers. This will increase your chances of multiple offers, but never guarantee them. If you succeed and get a few offers then you are more than likely to get top dollar for your property. This amount would be hard to top with any other strategy, especially if you choose to overprice your home from the beginning and let your listing sit and rot on MLS/Realtor for months. The key with aggressive pricing is that you are better off getting 5 offers and declining them all, rather than getting no offers at all! And even if the price is over asking, but you as a seller are not happy with the best offer on the table, then your are not obligated to sell your property.
Some myth goes around that agents love to list below market value because that guarantees us a sale. Well, I only get paid WHEN I produce a satisfactory result for my client, and no agent gets paid (none that I know) when he or she lists your home on MLS. Remember, the seller always has the final word when accepting an offer, not the agent!
Please note that this strategy works well with certain properties and only during the seller’s market.
Multiple Offers often bring bidding wars which is what you as a seller want, but some precautions must be taken.
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