Why You Should Never Overprice a Listing

Unpopular Opinion: Never Overprice.

I have had countless "kitchen table talks" with home sellers who ask me to list their homes for significantly more than market value. There are a number of ways they justify this in their head. They will say, “Well my mortgage payment is ($$$) and I still owe ($$$), so…I need to get at least ($$$) just to break even…”

One of my personal favorites is, “Well, you are going to charge me 6% just to sell it so, I have to make the offer price that much higher just to be able to pay you!” This one still gives me a chuckle. 

And the granddaddy of all overpriced home sellers: “It’s a lot easier to come down than to go up!” I digress…

Here are the key the realities that dispel irrational or emotional pricing beliefs:

1. Market Value
2. Finances
3. Timing

Market Value.

The market value is what the real estate market (albeit seller’s market or buyer’s market) commands. When someone asks me, “What do you think my house is worth?” my reply is, “It’s worth what the buyer is willing to pay for it.” Now, of course, I will run a comprehensive CMA. What homes in the neighborhood have recently been selling for acts as a good barometer for the subject’s list price. Additionally, I have added Pricing Strategy Advisor to my real estate credentials to truly home in (pun intended) on the best price for the listing. However, the price I say isn’t always what the seller wants to hear. They are arriving at their own price from an entirely different perspective.

Finances.

The list price should have nothing to do with how much you owe on the home, how many additional mortgages, home equity lines of credit you have, or the like. Just because the seller started using the home like a personal ATM doesn’t mean that they can list the house for some obscene amount. This can be an emotionally charged discussion, so it’s best to first ask the seller how much they believe the home is worth. After they tell you (and hopefully you didn’t faint), have your active, pending, and especially sold research readily available.  Ask them how they arrived at that figure since based on the proof you hold in your hand, that number doesn’t support the sales activity in the neighborhood. 

Timing.

Timing is everything. The first two weeks of the listing are the most important period. Just like any new product or small business in general, the initial listing period is the “ribbon-cutting” of the property. This is when it is your duty as the agent to “launch” the listing to your sphere, email campaigns, social media platforms, MLS, syndicated real estate sites, and everywhere in between. If you are doing all of the aforementioned with an overpriced listing, you will soon realize your efforts are all for not. 

During your real estate career, you will certainly work with sellers who only see thru their own lens. They may even start throwing Zestimates at you, which can be a hard pill to swallow as a professional agent. Your human valuation is by far superior to an algorithm. You will be tempted to tell them “I told you so…” if, despite your professional advice, they made you list the home at an unreasonable price and are now asking if a price reduction is in order.

Now you will be forced with the task of working in reverse to try to win back buyers you missed out on in the first wave. By this time, they may be under contract on something else. Never doubt your professional expertise. You have a license to sell real estate. Your seller does not. Try your best to keep emotions at bay and focus on the numbers. There is no gray area and thus no room to argue list price when the proof lies solely in the numbers. Your client will be grateful in the end.