Some agents promise potential sellers too high of a price just to secure their business. In the long run, however, this can really hurt a seller.
There are several reasons for this. First of all, the vast majority of buyers will not make offers on homes they consider significantly overpriced and simply move on to other listings, instead of putting in an offer below asking. We often find that buyers are hesitant to offer below asking — even if something has been on the market for awhile — for fear of offending the seller (this puzzles us most, since any bid is usually better than no bid at all).
Well-priced homes create a sense of urgency in the buyer/broker communities to act quickly with strong, clean offers, and often lead to competitive bidding between buyers, which is the most likely way to increase sales price. Overpricing wastes the optimum moment of buyer and broker attention: when it first comes on the market. This moment cannot be recaptured. Overpriced homes kill any sense of buyer urgency and take much longer to sell, which then significantly reduces value in buyers’ minds: “There must be something wrong with it if it hasn’t sold by now.” The data doesn't lie; price reduced properties in the Bay Area consistently sell for a lower average price per square foot than homes that don't require a price change. So it is better to go with an agent who will price your home to sell.
We, however, don’t mind other agents overpricing, since it helps our sellers by making their properties stand out as a good value in comparison. If a listing has inadvertently been overpriced, the sooner it is recognized as such and the price reduced, the smaller the negative impact. Price reductions must be big enough to regain the attention of buyers and their agents – typically, at least five percent.
The chart below illustrates how important it is to ask agents you are interviewing about their average days on market, how often they price reduce and most importantly, what their marketing plan is.
By: Yvo Smit, Team Strategist