Burgers, Steaks and the Overpricing Mistake
One of the most important aspects of selling a house is not removing family photos, painting the walls or having a million-dollar ad budget. Of course, all those things don’t hurt, but of all the things you can do to sell your home, proper market pricing is most important. It is the one thing that will either make or break the deal in 100% of real estate sales.
WHO DO YOU KNOW THAT WILL OVERPAY?
Buyers know when a home is overpriced (and if they don’t, never fear, their agent will tell them!). Today’s buyers are more informed than ever with a seemingly endless stream of data available 24/7. Every house is in competition with other area listings and pricing will be one of the top factors in a buyer’s decision to tour a property. For a non real-estatey example, let’s say we go out to a restaurant for dinner. There are two meal options for the evening—a steak for $19.99 or a burger for $24.99. I don’t know about you, but I’ll take the steak. It’s a simplified analogy, but the bottom line is, you want to be the competitively priced steak rather than the overpriced burger. If you’re the burger, all you’re doing is helping to sell the steak.
“…BUT WE WANT TO LEAVE ROOM FOR NEGOTIATION!”
On the surface, this sounds like legit logic, right? Well…not exactly. Here’s why: You can’t negotiate a non-existent offer! Actually, there is no rule saying that you have to negotiate at all. Let’s look at a very real-estatey example: You want to sell your house and both you and your REALTOR® agree that the fair market value is $100K. Instead of pricing at fair market value, you want to “leave room for negotiation.” So, you list it for sale at $129,900. All you’ve done is cost yourself valuable time and money. Why? Your true target market will never even see your house because it is priced out of their budget. Even if the buyer is approved for $115K (which is plenty to purchase the house at your true price), they still may never look at the home because most will not extend their search that high above their purchasing power. The buyers you are left with are in the $125K+ price range with higher expectations and the competing properties are much nicer than yours. Instead of being the best house in the $100K range, now you are the worst house in the $125K range. Yup, you’re the burger in a sea of steaks. Which would you buy?
DESPERATE TIMES MAKE FOR DESPERATE…BURGERS
The most showings will occur when the property is first listed. It’s new, it’s fresh and all the buyers want to see it. Once these buyers view it and end up buying something else (yeah, they bought the steak), you have to wait for new buyers to enter the market (and will likely have to reduce the price to become competitive.) When your house is for sale, time is your enemy. Generally speaking, your profit is directly correlated to the days on market. The longer it sits, the less you’re likely to make. It can also create a kind of frenzied desperation when there are no offers and you may find yourself grasping at a low-ball offer because you are so thrilled that someone is finally interested. It’s better to just be a steak from the beginning rather than become a desperate burger.
BE THE STEAK YOU WANT TO BE
Of course, price is not the only reason why a home does or does not sell—location and condition also come into play. All are important, but price is the only one that can certainly be changed and can overcome both negative location and less than ideal condition. Price is king and condition is queen and overpricing will cost you more in time, stress and money than it will ever make you. Don’t fall into the pricing trap—be a steak, not a mistake.
Lisa E. Priest loves a good steak and is a local REALTOR® and Property Manager with Picket Fence Realty, Inc. You can reach her via phone or text at 903-948-3343 or at BuyPalestine.com.
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