Dangers of Overpricing
- MINIMIZES OFFERS
An overpriced house discourages prospective buyers from making offers if the difference between the asking price and market price is substantial.
- AGENT ENTHUSIASM AND RESPONSE
Agents lose interest in property that is overpriced. They do not want to waste time with negotiations on an overpriced home when they can enter into a contract for a home that is priced correctly.
- QUALIFIED BUYER EXPOSURE
Overpriced houses fail to attract qualified buyers, qualified buyers are usually working with agents, know market values and are looking at multiple homes at once. Qualified buyers do not want to overpay and will simply move on.
- DECLINE IN SHOWINGS
Agents avoid showing overpriced houses in order not to lose credibility with buyersa nd because they know that an overpriced home probably will not sell above market value and will have issues when the appraisal comes in.
- LOSES PROSPECTS FROM SIGNS
Prospects who learn about the house from the sign get turned off if it is overpriced. They do not move forward to even see the house.
- LIMITS FINANCING
Financial institutions and mortgage companies finance only a percentage of the true market value of the house. If the house is overpriced, they usually will finance a lower percentage, thus reducing the available financing and requring the buyer to bring in cash to make up the difference between the asking price and the true value. What buyer would want to do that?
- WASTE OF ADVERTISING DOLLARS
A house that is unrealistically priced fails to get normal advertising response. This reduces the effectiveness of advertising and results in the loss of advertising dollars.
- LESS FOR SELLER-STALE LISTING
Eventually market interest in the overpriced property completely declines. As this stage is reached, the seller becomes desperate and he begins to feel he would sell at any price. In the meantime, he or she must bear maintenance and holding costs. The net result is that the seller gets much less than he could have if the house was correctly priced in the first place.