Overpriced Homes And
Phantom Negotiating Leverage
Is a too-high asking price negotiating leverage?
Apparently, some Sellers today think that it is.
Instead of pricing their homes within the range suggested by the “comp’s” (comparable sold homes), they stake out a price as much as 30% above.
Why? Negotiating leverage (presumed, at least).
When their home doesn’t sell, as it invariably doesn’t, rather than drop their price, they then instruct their Realtor to quietly put out the word that “the price is negotiable.”
Memo to these Sellers: 1) the price is always negotiable, no matter what you’re asking; and 2) if you price your home 30% above market, and it then sits for 6 months (or 2 years), it’s not exactly a secret that you’re overpriced.
Sellers who overprice invariably shoot themselves in the foot, for two reasons.
One. Homes aren’t sold in a vacuum.
Rather, they’re sold in the context of a peer group — one that the Seller picks, by dint of their asking price.
If your home is really worth $500k, but you ask $650k, guess what? You’ll be compared to $650k homes for sale and found wanting.
What happens next is that the overpriced home sits. And sits.
Which leads to . . . . reason #2:
Time on the market is a home Seller’s enemy.
Depending on the price range, a for-sale home starts to look shop-worn anywhere between 3-6 months. After a year, there’s actually a certain stigma: ‘the Jones home? It’s been for sale forever.’
Instead of feeling a sense of urgency and overlooking flaws, prospective Buyers circle at their leisure, zeroing in on the smallest blemishes.
The net result?
To overcome Buyers’ skepticism, not only does the overpriced home Seller ultimately drop to market value, it typically overshoots on the low side.