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Sellers: The Dangers of Overpricing

“We can always start high and reduce the price later”. “It can’t hurt to test the market at this price first”. “This is just the asking price… people are going to offer less anyway”.

Sound familiar? One of the most difficult decisions a seller must make is pricing their lakefront home to sell. And it should be… because you certainly don’t want to leave any money on the table. But in reality, the best opportunity for a sale is to get qualified buyers into the home during the first 2 weeks on the market. If buyers perceive it to be a good value, they will come.

An asking price that is beyond market range will attract fewer buyers, prolong market time, help sell your competition, and will eventually sell below market value.

Determining a Market Sensitive Price is the single most important decision you will make when selling your lakefront property. An impartial evaluation of market activity by real estate professionals is the most effective way to estimate a property’s potential selling price.

A Comparative Market Analysis is an x-ray of the market and considers similar properties that have sold in the recent past (within 6 months). It should also discuss properties that are currently on the market (competition) and properties that have failed to sell (why didn’t it sell?).

The existing pool of prospective buyers determines a property’s value based on several factors including location, design, amenities, condition, competition, time on market, seller motivation, incentives and economic conditions.

Incidentally, you should never use the term “asking price”. It implies that you don’t expect to get it. Instead, use the term “market value” or “market price”.

Factors that have little or no influence on the market value are: 1. the price the seller originally paid for the property, 2. the sellers expected net proceeds, 3. the amount spent on improvement, and 4. the home the seller is trying to buy.

Here are some key pricing strategies:

  • Abandon your personal point of view. Certainly easier said than done. But remember you are selling a product, not memories. The sooner you detach yourself emotionally, the easier the whole process gets.
  • Complete a professional real estate appraisal. In today’s market, this is the ONLY opinion of value that matters. Buyers will not pay over appraised value no matter how much they love your home. In fact, they will use their lenders appraisal to renegotiate. Don’t give them that chance…know your numbers going in.
  • Do your own market research. Go to open houses around your lake and try to make an impartial assessment of how those homes compare to yours in terms of location, size, amenities and condition. Assuming all the asking prices were the same, would you buy your home or someone else's?
  • Sweeten the transaction terms. Some buyers have needs that go beyond the bottom line. If you're willing to close quickly, you'll attract buyers who want to move in right away. If you can offer seller-financing, your home will appeal to buyers who need to stretch their financial resources. Sometimes negotiating in a boat or lake toy might get them to lean towards your home or close the pricing gap. The more creative and flexible you can be in meeting the buyer's needs, the more success you'll have in pricing your home to sell.