NEW YORK (MainStreet) -- A new study by property website Zillow.com shows that many home sellers are unrealistically optimistic, asking considerably more than they’re likely to get. As a result they risk long delays in finding buyers, which means a lot of lost revenue while the house sits idle on the market.
What's more, homeowners who bought after the housing bubble peaked in 2007 were even more unrealistic than those who bought before or during the bubble, perhaps because post-bubble buyers thought they got better bargains than they actually did.
“We found sellers who bought after the housing bubble burst, in 2007 or later, price their homes 14% above market value,” said Zillow, which used sales of comparable homes to figure market value. “Those who bought before the housing run-up, prior to 2002, overprice by nearly 12%. Somewhat surprisingly, sellers who bought during the run-up, from 2002-2006, seem to be the most realistic, pricing their homes 9% over market value.”
Market value is a tricky number in and of itself, as comparable-sales data does not always provide a good guide to a home’s value. Nearby homes that have sold in the past six months or so may be quite different from yours in appearance or condition, and there may be too few recent sales to get a proper valuation. That being said you won’t have much chance of getting a premium price on a cookie-cutter condo if identical units have sold for less.
As a seller, you have a right to ask for whatever price you want, which you can drop if no one bites. You may get lucky, but asking too much involves a number of risks, even if you’re just “testing the market” for a few weeks or months.
On the pro side, it is worth mentioning that in rare cases you may get your high asking price. Selling a house is not like a dealer selling cars or McDonald’s selling Big Macs, because the home seller needs only one buyer. It’s possible that someone will find your home so perfect that it justifies a premium price, though. For example, a home with a garage converted into a shop may be a turnoff to most buyers because most of them have cars, but a non-driving tinkerer may love the extra workspace.
More often though, pricing your home too high works against you in some important ways. Here are three of them.