Under Pricing your Home is bad as Overpricing your it.
I have been in real estate now 15 years (wow part of this makes me sad because I am now dangerously approaching being middle age) but on the bright side, I can now site my experience instead of saying, “it was in an article I read.” I have railed for years that over pricing and underpricing your home is one of the worse mistakes you can make. I did not come to this conclusion by myself- it is well documented by experts in real estate, and there are hundreds of articles written every year decreeing the simple fact that overpriced homes do not sell well. Underpricing your home is less documented and less talked about but can be just as detrimental as over pricing it.
think we can all list about five negative effects of pricing your home too high. It is so well documented that I can’t believe people still do it; human nature is just difficult to change. I call it the “it’s worth more because I own it syndrome.” Here it goes- in the 15 years of selling real estate in Elk City and Western Oklahoma I have seen the way people search for homes. It has become exclusively through the use of smart phones. Most sites use search parameters to search for homes in a given area, most use price (ding ding), although there are countless parameters. When someone moves to Elk City and wants to buy a home and their budget is $150,000, they will plug in the parameters $140,000 to $160,000. If your home is overpriced, it won’t even show up in the search for your prospective buyer. The buyer literally has to drive by your house and see a for sale sign to know it exists. (This works for underpricing as well, and I just gave away one of my points for the next paragraph.) The other main reason why over pricing is bad is that people are not stupid. They are well informed and have an array of different tools to use to determine what a home is really worth. And oh, by the way, most people get a loan and an appraiser shows up. While you might fool the buyer, you’re not going to fool the appraiser. No loan no sale. You have to rely on finding someone dumb with cash, and those two are not positively correlated.
Underpricing in the Elk City market is relatively new to the game and is not as common, mostly because of that human nature thing. I will say one thing if you don’t mind losing money it’s a fast way to sell, and you don’t have to be much of salesperson to sell things below market value. It makes sense to sell fast sell it below market value. However, remember what I said about search parameters and the example I gave? It works the same way if your home is worth $150,000 but you price it at $120,000- there are going to be a lot of folks who never see your house. Folks in the underpricing camp, say, “Tyler you’re wrong; we are never going to actually take less for our house than market value this is just a way to bait people into making an offer, and then we will have people bid against each other or we will have an investor with a predetermined bid, like an ace in the hole.” Let me say it again, “people are smart they know how this works they don’t like being a pawn in the game.” A majority of them won’t even look at the undervalued home due to the game they know they have to play to get it, thus reducing the number of available buyers. This is even more so for rural people. I go to real estate conventions all over the US, and even Canada, and I explain to my fellow Realtors that a lot of things that work in Urban America will not work in Rural America. People in Rural America are just less fussy, and we don’t put up with a bunch of bunk- we like to get to the point no games no gimmicks.
Over and underpricing your home is going to eliminate potential buyers for various reasons. The buyer may not find your home in the world wide web due to search parameters; they don’t think you’re a serious seller when overpriced, or worse you alienate people with your bait and switch game, and they won’t even go look at the home. The moral of the story here is to price your home at the current market value to reach the most available buyers, make the pool of buyers larger not smaller. Priced correctly you will have the best chance for success.