You're selling your home, and you obviously want to sell for the highest price possible. Who doesn't? Getting the highest bid on a home is the ultimate goal of all sellers (along with other perks such as a convenient closing date and a hefty deposit).
But you can't necessarily ask for the moon if the market doesn't allow for it. After all, buyers aren't going to pay much more for a home than what it's really worth according to current market conditions. If the house down the street just sold for $600,000 and it's nearly identical to yours, for example, they likely won't pay that much more for yours if it doesn't bring a lot more to the table.
What Happens if You Price Too High?
The knee-jerk reaction for many sellers when it comes time to establish a listing price is to aim for the sky. With no rhyme or reason, many sellers arbitrarily pick a number that they believe their home is worth. It's not uncommon for sellers to think their home is worth more than it really is.
They've likely lived in their home for a long time and developed many memories in it. Maybe they've celebrated a few special occasions in their home, such as the birth of their children, which has made their home special to them. With such an emotional tie to their house, it's no wonder that many sellers hold a lot more worth in their home than buyers would.
But while it may be a home to sellers, it's just a house with four walls to buyers. They don't have the same emotional connection to the home - yet. As such, it's common for sellers to want to ask for more when they list their home on the market simply because they believe it's worth more than it really is.
Pricing Too High = Losing Buyers
The problem with listing too high is that you run the risk of leaving a lot of buyers by the wayside. Buyers who may have been interested in your home may just gloss over your listing because of the price. For instance, if your home is actually worth $500,000, buyers looking within that price range won't even see your listing because it won't register on their radar. If they are looking specifically at homes at that price point, they probably won't see your listing at all.
This scenario can put you in the position to lose a lot of buyers that could have otherwise seen your property. Even those who do look at your home and love it might still be hesitant to put in an offer simply because the price is too high.
A situation like this causes your listing to become "stale," which means it will just sit on the market a lot longer than the average listing in the neighbourhood before being sold.
Do you know what happens to a listing when it becomes stale? Buyers start to think something is wrong with the home. After all, why is no one buying it? Why is it still sitting on the market when other similar homes are being sold in a much shorter amount of time?
That's the danger of over-pricing a home.
Luckily, your real estate agent will know exactly what to do in order to come up with a sound listing price that will attract as many buyers as possible and get you the highest sale price on your home: by pulling a comparative analysis report (CMA).
These reports basically list similar homes in the area that have recently sold. The prices that they sold at will give you and your agent a great starting point at which to price your home. While you can always look at what homes are currently listed at, you would get a much more accurate picture of what the actual market value of a home is by looking at its sale price. That's the number you should really be looking at when pricing your home for the market.
Your home's listing price is one of the most important factors in selling real estate. As a seller, you obviously want to get the most money for your home. However, you're not going to do that by listing as high as possible. Instead, strategically pricing your home according to current market conditions is what's going to get you the most competitive price for your home.