The High Cost of Overpricing Your Property
The facts indicate that there is a market shift in progress. Higher interest rates with minimal inventory is spurring some sellers to remain aggressive when pricing their homes for sale. Last year at this time, some listings were selling for as much as 33% over their list prices. However, interest rates were in the low 3% range. In the end, it is about what buyers can afford to pay in a monthly payment.
The active homes (for sale) inventory across our region is at historic lows. The current Washington, D.C. Metro inventory is between a 30-60 day (depending on location) supply based on last week’s contract activities.
My market analysis disclosed that the active to under contract prices show a dramatic price disparity of 15% to 60% (location based) higher than the average prices of the properties that went under contract. Accordingly, the average days on the market for the active properties is also 33-57 days longer (about 66%) than the under contract properties.
In our recently wild market, it was impossible to underprice a property because it would get bid up to above its market value. Therefore, the real estate agent’s role was that of order taker and contract dissector. That condition has now changed. Now, the experienced, knowledgeable agent will analyze the market’s activity, study recent comparable sales, and recommend the best pricing for your property to get is sold as quickly as possible because that is when the optimal price will be received.
Under today’s changing circumstances, we often hear, “If they don’t like our price, they can make us an offer.” The reality is that they will not make an offer and will buy another property that they deem better priced. Buyers do not want to get too creative or too aggressive. They do not want to enter into negotiations that could end badly while losing better opportunities.
In any market, an overpriced property will languish. In fact, not only will the property languish, but it will ultimately sell for below market value. The chart below shows how the initial price affects the sales price. You can see the importance of pricing the property correctly from the outset.
If a property is overpriced by five percent, it is not unusual to have a final sales price of 3%-5% below actual market value. Why give up value on the gamble that a buyer will overpay in today’s market?
In our industry, the saying goes, “The first offer is usually the best offer.” The first offer typically comes in quickly with a good price and strong terms. Missing out on that first offer will diminish the seller’s ultimate return.
How is market value determined? The skilled, experienced, and knowledgeable real estate agent knows their market, their buyers’ expectations, and is well connected with the top agents in the area. Their wealth of knowledge and experience will help you make the correct pricing decision.
The bottom line: properties that are priced in line with buyer affordability are selling quickly. Properties pushing prices beyond market values are staying on the market.
Are prices falling? No. Many homes are being priced incorrectly and need reductions to bring them in line with actual market values.
If you are thinking about selling your property this year, do yourself a favor and call one of our exceptional agents for a market analysis at 703-624-8333. You will know that the price you set on your property will be competitive, thus bringing you the best returns.