Aug 19, 2010

Tempted to Set a High List Price and Wait? Three Reasons Not To

Setting a list price for your home is definitely tougher than it used to be, what with market fluctuations, a lack of many comparable sales to go by, and that lingering feeling that, if buyers were willing to pay so much more a few years ago, why shouldn't they soon be willing to do the same?

Add to this the knowledge that houses aren't exactly flying off the shelves -- sellers wait many weeks, if not months, for an offer (depending on the house and the local area) -- and you've isolated the germs causing the pernicious "Let's just wait" syndrome. Sellers falling prey to this tell themselves, "I'm not in a hurry, we'll just set the price as high as we think it should be, and then wait as long as it takes for someone to fall in love with the place."

If I knew how to add audio to this blog, a "backfire" sound might make fitting accompaniment to each of these three reasons why such a strategy doesn't work:

  • It's a gamble you could lose a lot of time and money on. Time will be ticking by as you wait for that perfect (or naive) buyer to come along, and time is the enemy of your list price. The longer a house sits on the market, the more buyers will figure you're desperate, and start underbidding. You eventually may have to sell for less than what you thought was the minimum possible.
  • The appraiser may not share the buyer's enthusiasm. Even if you do have a buyer who falls in love with your place and isn't savvy enough to realize that the relatively low values of comparable properties and the lack of competing bidders give them every justification to bid less than you're asking, that buyer probably needs to get a loan. And lenders these days don't hand out money without making absolutely sure that the house is worth what's being paid for it, as judged by an appraiser. If the appraiser sent by the lender says your house isn't worth what the buyer is offering, the deal may fall through -- unless the buyer pays all cash, but good luck finding that buyer.
  • You'll drive your real estate agent crazy. Agents have seen more use of this strategy lately than they care to. They're already edgy about the amount of time they put in for no return in this down market, which puts working with a client whose house won't sell in the foreseeable future low on their priority list. You want an agent who's enthusiastically marketing your home, not rolling his/her eyes every time you call. For more on that from the agent's perspective, see this recent column in Inman News by Teresa Boardman.  
The solution? Evaluate the comparable prices carefully and set a price that you think is fair -- or even a little low. You may even generate some excitement about your house being a bargain -- thus bringing in competing bidders.