Thinking that your home for sale is overpriced?
Most real estate listings are overpriced. We all know that, but we also know that they are not overpriced by much. Historical records going back to when we started keeping them here in Kitchener-Waterloo show us that homes tend to sell within 3% of their last list price, and many sell closer than within 1%. That means that a home listed for $500,000 will likely sell in the $490s (1%-2% off the list price). I don’t think this is much of a revelation to anyone, is it?
Interestingly, the listings that are the most overpriced are at the top of the market. It is not unusual for a home listed for $1.1M to sell for 5% or even 7% off the listing price. Numbers this big don’t make a sound when they fall to earth.
Condo units too can break the 3% rule of thumb.
But today’s post is about the middle of the market, the main market and that means that most houses sell most of the time for very near their list price.
Why do you think that is?
I think it is because we are all working from the same information and that we are all pretty well informed.
Questions for homebuyers
- Do you as a homebuyer know when a home is overpriced?
- Do you as a homebuyer want to visit homes that are obviously overpriced?
- Do you as a homebuyer want to negotiate with a home seller over an overpriced listing?
Questions for home sellers
- Do you as a home seller think you can fool the public at large?
- Do you as a home seller want to prolong the selling experience?
- Do you as a home seller want to be proven what is obvious to everyone?
Signs that your home is overpriced
But how do you know if you are pricing too high? Houses are unique. Home values vary from neighbourhood to neighbourhood, from street to street. Home and neighbourhood features impact the value positively and negatively. How do you know if your home is overpriced?
To infinite and beyond
If your home is priced ‘well above’ neighbouring properties currently for sale, then you are likely priced too high. Of course, maybe if all the homes are priced at the same level they may all be too high. A better indicator of market price is the most recent neighbourhood sales not what is currently for sale
Highest price, shortest time, yada yada yada
If you interviewed three or five Realtors and hired the one who told you that he would get you the highest price in the shortest about of time, then you are likely priced too high. There is no magic in real estate. There is no secret sauce. We do not have a passel full of buyers in our back pockets, waiting to buy our listings. Boutique brokerages do not have an advantage over big box brokerages or vice versa. Real estate agents at big franchises don’t out sell those at mom and pop outfits. If either of those things were true real estate agents all work in the same way, at the same place…
Like a birthday party without presents
If you are getting a lot of traffic but no real interest, then your price is too high. In a seller’s market, overpriced listings will see lots of people visit open houses and get lots of showings with agents but offers will not come. In Kitchener-Waterloo we are simply too polite to low-ball a home even if it is obviously overpriced, that and we think the home seller will need too much work to get to where he should already be.
The people have spoken
With our showtime system the amount of feedback we get from our showings now is nearly 80%. It is easy for Realtors to leave feedback and most do. When every Realtor is telling you that the listing is overpriced then, guess what, it’s overpriced.
Worse than average
Currently the average days on market is 29 days. I’m not a big fan of averages because they don’t tell the whole story. But when your home have surpassed the average days on market without an offer it is a strong indication to me that the price is too high.
You get a low-ball offer, or two, or three. Some agents do not mind submitting low-ball offers. Whether they can justify their low-ball offers with comparable data or if they just see that the home is not moving and try to get a deal for their client, low-ball offers often start to arrive once a listing has been lingering on the market for a while.
When you see that your neighbour’s homes are selling but you are not then you are likely overpriced. It would be different if no one was selling, but they are and you’re not. This is a clear sign to lower your price.
Final thoughts on overpriced listings
There are lots of reasons that homes do not sell and the wrong price is just one of them. Decor, condition, location, neighbourhood, design, stigma, bad photos, comparative value, poor marketing, unresponsive communication, lack of urgency, uncooperative sellers, and market conditions are all reasons that homes do not sell. But Realtors always say that the right price will even sell the wrong listing.