Understanding the risks of overpricing your home

Question: Dear Kari, I am going to be selling my home. My thoughts are to price my home a little over the current market price. Therefore, I will have room to negotiate with the buyers so they can feel they have received a good deal. Can you tell me your thoughts on this strategy? Answer: Thank you for your good question. The asking price of your home has nothing to do with what you paid for it, or what you think it's worth, although it's understandable that for some sellers it's difficult to hear a lesser price on their home, as they most often have emotional ties. Sometimes, sellers invest a ton of money in improvements and upgrades that will bring them more money when they sell the home. In several situations, these improvements might not make back the investments. Today's buyers are wise and clear-minded shoppers. They will not want to make a mistake such as overpaying and not receiving full benefits. Buyers know what other homes in the neighborhood have sold for, along with all the particulars of each home. Most buyers are prepared to purchase immediately and are lender approved. This provides them the upper hand of feeling they are in the driver's seat. If you overprice your home, it might not show up in some search results. Buyers search for homes using the parameters they desire. Price range is one of the most critical. An overpriced home can attract the wrong buyers, as it will not compare favorably with the realistically priced homes in a buyer's price bracket. If your home is missing the amenities, square footage, bedrooms or other features of homes within the price range you've placed it in, it might not ever sell. The fact is overpriced homes linger on the market and risk becoming stale. Then some agents and buyers often wonder what is wrong with the property. Most often, when a buyer moves on from a listing, they rarely come back, even if the price is reduced. This creates a high risk of getting less for your home than if you priced it correctly the first time. Remember, the longer your home remains on the market, the more expenses you incur. Every month your home goes unsold you put out money for mortgage payments, taxes, insurance, utilities and other home expenses that will not be recovered. When a home is overpriced, it's most likely the agents will not want to show your home because the agents only get paid for homes they sell, not show. Agents may also think if the asking price is too high, then perhaps the sellers will be difficult to negotiate other aspects of the sale process with, or may not be reasonable with any possible needed repairs. Some agents will show an overpriced home only to use your home as a comparison to the new well-priced home. This method is used to get a fast sale. Good agents will tell their buyers honestly which homes are overpriced. Good agents want to be the buyer's hero. This is so they will tell their family and friends to use them, too. If you do obtain a sale, keep in mind the buyer's lender will send out the appraiser and the lender is only willing to lend on a well-priced home. The appraisal report must provide documentation of several similar homes being sold and have closed escrow to support the buyer's and seller's agreed upon price or no loan and no deal. This is used by some buyers who know a home is overpriced and will ask you to reduce it later once in the sale. This is not a good practice because at this point, perhaps the sellers have made other plans, counting on the higher sales price that will most likely not happen later in the process. Keep in mind the interest in a home for sale is always highest when the listing first hits the market. The best advice is to find a good professional Realtor you trust with a good marketing plan and great negotiation skills. Ask her or him to go over the comparisons in your neighborhood and help you select the highest list price that will cause your home to sell. Kari McCoy, CRS, has been a Realtor for 30-plus years and owns the Kari McCoy Group.