When some homeowners put up their properties for sale, they have certain biases. They are loss-averse and overvalue items to which they’re attached or which they’ve built themselves. This might cause them to overestimate their home’s value.
Consequences of overpricing
A major reason behind a house remaining unsold in a healthy market is overpricing. In effect, by setting an unreasonable price, you’re actually assisting the other properties nearby to sell faster.
Buyers of high priced assets are not likely to shop in closed spaces. They survey markets thoroughly and then make decisions. It’s quite simple – if your home is priced $10,000 above similar properties, you’re not going to get offers.
Demand and supply
A major driving factor in the determination of a price is the demand. When there’s a seller’s market, the high demand allows sellers to quote slightly higher prices for their homes as compared to the price of similar homes sold earlier.
High demand and low supply is the perfect combination for quoting a higher price. But make sure you don’t get too greedy. The market can bear a rise in price up to a point. If your property is priced beyond this, your competition will start looking better to buyers or they might decide to simply wait till something more affordable is put up for sale.
Emotional attachments don’t equal higher value
The main reason behind sellers overpricing homes is emotional attachment. It’s extremely difficult to view your own home objectively because you’ve lived there for a considerable period and maybe even worked a lot for improving it.
Regardless of the time and money you spent on renovations, the value of your home is in the eyes of the beholder. If buyers don’t regard your renovations as value additions, you’re not likely to get paid for them.
Sure, certain renovations like new windows, new roof, and upgraded heating systems will definitely increase your home’s value. However, do not expect a 100 percent return on investment for them.
When it’s related to aesthetic renovations, this is specifically valid. Your dream kitchen might possibly be a prospective buyer’s nightmare. It all boils down to personal tastes. Take care not to assume that a fresh coat of paint or a renovated bathroom will add value. You may love the new colorful tiles in your living room, but a lover-of-white-tiles buyer might hate the colors.
Even though you think you’re pretty knowledgeable about real estate values, we think the best thing to do is to call a professional appraiser in. His inputs will enable you to be absolutely sure that you’ve set an appropriate price.
It’s not a great idea to just “give it a try” by listing a higher price for your home. This can adversely affect your home selling efforts. A home sitting in the market for long periods is likely to get more stigmatized. Buyers might get the impression that something is lacking in the house and then try to figure out if you’re desperate to sell.
To get a realistic price range within which you can list your home, you need to perform a comparative market analysis. Based on how urgently you want to sell, you can set an aggressive or competitive price within that range.