My wife and I occasionally try to come up with a price for our house. At one time this was an endeavor borne out of curiosity. Now, with our lives changing in different ways, we are looking at it a little more seriously.
With training as a respiratory therapist, my wife found it very difficult to remain dispassionate and professional when our child had trouble breathing. As a real estate sales representative, I have the training and insight to do market evaluations. But I suppose I face a similar challenge to remain dispassionate while evaluating our own home.
If you have poured money into a place, you want to recoup that investment. Unfortunately, renovations rarely get back all the money they cost (although kitchens, bathrooms, and general repainting are the best investments when viewed from this perspective). If your neighbor’s house sold for some astronomical sum, you want to get that much for your home too. If you have debt, you want to be able to at least retire the debt on the home, and hopefully pay off all your other debt too. You may have a “profit” target or a retirement nest egg amount you want to achieve.
So most people have a number in mind when they put their house on the market. There’s really nothing wrong with that. Sure, every real estate professional has a story or two about the “unreasonable” homeowner who wanted to get more than their house was worth. But everyone has their own motivations for selling their homes and for moving. Choosing to demand a particular price and accepting that you might not get that is perfectly fine. In fact, in a negotiation, that’s a pretty strong position to take: “If you’re not willing to pay what I want, then we have nothing to talk about.” If you really mean it, and actually are willing to walk away — that’s fine. But you have to realize that your house may not sell at all.
The sad situations arise when someone must sell their home by a deadline but truly believes that the market should bear their chosen price. They see lots of evidence to the contrary, but continue to lay blame on other factors rather than reducing the asking price. The house goes unsold and they end up actually losing far more money in the long run.
This is a trap that anyone (REALTORS® included) can fall into.
Dangers of overpricing
from the Ontario Real Estate Association
- Qualified buyers who might otherwise have purchased the property do not seriously consider the home, as it is beyond their price range.
- The property may become stale as motivated buyers pass on the property. Showings which do occur are usually for comparative shopping (that is, to demonstrate attractive pricing of other listings).
- Staleness (a high number of days on the market) can lead to buyers thinking that something is possibly wrong with the property (over and above the unrealistic listing price).
- The seller may have to reduce the price below fair market value to revive interest in the property.
- If the price is reduced, bargain hunters are attracted hoping the seller is under pressure to sell.
- The property may sit on the market for a long time and not attract any offers. If the seller has committed himself/herself to another property, he/she may feel pressured into accepting the first offer that appears even if it is below market value.