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Pricing Strategy – Does Overpricing Hurt Your Sale?


It’s pretty awesome to see a home sell for a high price in your neighborhood. The good news is, your home has the potential to sell at a high value too. I like to say that when a home is sold for at a high price point, the listing agent did a great job. Because there is a strategy to maximizing gains. However, one risky strategy that appears the most straightforward is to list your property at the price you want, which in most cases could be considered overpricing.

“Ironically, instead of getting more money… [Over-pricing] usually stigmatizes a property and reduces the eventual sale price to less than it would have been with more realistic pricing.”

House Selling for Dummies

This is a lot of information to process, but here are the main points:

  • Price it right to begin with.
  • Prepare the home to show in its best possible light.
  • Implement the most comprehensive marketing plan possible.
  • Hire an agent who knows how to negotiate effectively on your behalf, and manage the disclosure and due diligence processes.
  • The difference between pricing fairly and over market value can add up to tens or even hundreds of thousands of dollars.

Here is the truth about home pricing:

Neither agents nor sellers determine market value: Only the market – willing and able buyers — determines market value. When a home is priced well, it creates a sense of urgency in the buyers. The buyers thought process is, “I can actually afford this” and may act quickly with strong, clean offers. This is the most likely way to increase sales price because it often leads to competitive bidding between serious buyers.

dangers of overpricing

Overpricing Explained Through Price Reductions: How It Affects Sales Price and How Fast You Sell

Consider this: The vast majority of buyers will not make offers on homes they consider significantly overpriced. Either they don’t want to waste their time or write a lower-than-asking-price offer that may offend the seller. In any case, they’ll just wait for a price reduction or until a listing shows up at their target price point.

Keep in mind that a buyer may be well-qualified to pay at your desired price. A home should be listing at “fair market value”, the price that a reasonably knowledgeable buyer is willing to pay. The goal is 1) attract buyers 2) encourage them to write their best offer 3) counter each offer with a number closer to your desired price. This is where the fun begins. You will never know which buyer will sign the counter!

Momentum is crucial!

Overpricing wastes the optimal marketing moment for your property when it first comes on the market. No matter how you present your property, the initial “Just Listed” moment cannot be repeated, especially if your property’s price doesn’t reflect comparable asking prices in the neighborhood. However, should you decide to “feel” the market by pricing higher than market value, the sooner you realize this, the lesser the negative impact. The strategy should be to reduce your price by at least 5% as soon as possible to regain the momentum of buyers and their agents.

On the contrary, overpricing can create significant opportunities for buyers – since homes with price reductions sell with much less competition from other buyers than new listings – so buyers and agents should keep a close eye on new price reductions. Often, there are no particular negative issues with price reduced listings except that they were overpriced to begin with.

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