What is it? You go to the dentist and he or she says you need a cavity filled. You get it filled. The doctor says you need blood pressure medication. You take it. Your Realtor says your house is worth $400,000. You say "I want to try it at $450,000."
Really? Why is that? Obviously you want to get top dollar for your home when you sell it. We want that for you, too. But here's what happens when you price your home too high and hope one buyer is out there...
That one buyer doesn't exist. No one is going to love your home so much they will pay over the market price. Sorry, but that's the truth.
Even if they do fall in love and offer too much, the appraiser will value it at market rate. The bank will not loan on more than that value. Your deal will fall apart.
Most agents have set their buyers up on a program to automatically send out new listings coming on the market. Buyers in your true price range will not get the news your home is available. Buyers in the inflated price range will get the news, but your home will show poorly against homes which truly are worth $450,000. Buyers won't want your home.
And there you are, sitting on the market, getting no showings and no offers in the hottest market we've seen in a long time.
Eventually the market might finally creep up to where your home is at the correct price point. But the selling agent will see the house has been on the market forever (okay, a bit of an exaggeration) and will counsel the buyer to throw a lowball offer at it. Which will annoy you...
Better to price it reasonably from the get-go, get it sold and get on with your life.
So how do you know how to price it? The best way is to look at what is currently on the market (this is your competition) and price it to be the most attractive property in that market segment. The value will be based on location, square footage and condition.
"But I put in wood flooring and I put fancy hardware on all the cabinet doors!" you say. That and $5 will get you a coffee at Starbucks. Hopefully you enjoyed those upgrades. They will make your home more attractive in your price category, but will not add to the value. When it gets down to it, only quality kitchen and bathroom remodels in older homes are upgrades which could significantly raise the price point.
The price is set by the marketplace, not by you and not by your Realtor. Is there a wiling buyer able to buy your home? At what price? That is the value of your home.
If by some fluke your agent is wrong about your home, the marketplace will let you know. Imagine this. You price your $400,000 at $300,000. Every buyer in town will know about this immediately and you will get multiple offers. You can then begin a bidding war. But guess what? The additional buyers will disappear when you get to the true value of your home. Once you reach the correct price point people will stop bidding up.
Do yourself a favor. Choose your Realtor carefully. And then follow his or her advice. You'll sell your home quickly with minimum strain.
Wishing you a five star experience!