Should you overprice your home when selling? NJ realtors weigh in
Maddie McGay, NorthJersey.com
5 min read
Home is where the heart is, right? It's the place where we make some of life's most precious memories, and a place we have likely spent plenty of time and money both upgrading and maintaining.
So, it's no wonder that those looking to sell their home might believe their property is worth top dollar and want to list it on the market for a hefty price. But, your home might not be worth what you think it is, and overpricing the property is a detrimental selling mistake.
"Every seller thinks that their home is the best on the block, and rightfully so. They have an emotional attachment to it," said Betti Russo, a broker sales associate with Keller Williams Prosperity Realty in Wayne and Oakland. "It's easy enough for people to want to get the most they can for their home. Everyone does, right? But, overpricing doesn't achieve that. Overpricing goes against exactly what you're trying to do."
While you're free to list your home for however much you choose, overpricing it might make the selling process more difficult. These are four issues you may face if you overprice your home when listing it for sale.
You'll waste prime marketing time
Typically, homes for sale see the highest amount of activity from buyers within the first two weeks of being listed. By initially overpricing your home to "see what happens," Russo said you'll be wasting time that is most critical for marketing and attracting potential buyers.
A home listed for sale in early 2024 in Montclair.
"Your window of opportunity is that first two weeks. If you're waiting a week or two to see what happens, you're losing valuable time," Russo said. "I don't believe in 'let's see what happens,' It's never a good idea because you're just losing your first two weeks of opportunity when you're going to get your best offers."
As a result, the home will likely sit on the market for much longer than it should be before getting an offer. And that is only after a series of price reductions to try and increase buyer interest.
"They do have less traffic coming in and out of the house. And, that results in offers that are probably lower, or maybe there will be no offers at all," Russo said. "Then, you have price reductions and then the house is sitting on the market for an extended period of time, longer than what the norm is for the market."
Buyers might be wary of the price
Nena Colligan, an agent with Keller Williams Village Square Realty in Ridgewood, said that since today's market involves a lot of bidding wars and sales over-asking price, overpricing your home will turn buyers away.
If your home is listed for the buyer's max budget, they're not even going to consider putting in an offer. In contrast, if you list your home for its market value, which is in the middle of a buyer's budget, they'll be more willing to put in an offer because they'll have space to bid.
"Buyers have learned that if they have a budget of $800,000, they shouldn't be looking at houses that are on the market for $799,000. They've lost houses to bidding wars and their friends have lost houses to bidding wars," she said. "So what they're doing is saying, 'Okay, if my max number is $800,000, I'm going to look at houses up to $750,000,' or something like that so that they can maybe be in the game. If you price it at $800,000, a lot of people are going to say, 'Forget it, I can't look at that.' It's a bad idea, you're shooting yourself in the foot."
The appraisal value won't match
In the event that you overprice your home and a buyer is actually interested in purchasing it, the property may not be appraised at the listed price. This could be an issue, as lenders will only approve a loan amount based on how much the home is worth on the appraisal report.
Let's say you listed your home for $600,000, but it only appraises for $550,000. This means that the buyer's lender will only loan them $550,000 because that is what the house is worth, and the buyer will be responsible for the remaining $50,000.
“There is a value for your home and it’s according to what you’re offering. That’s not just talking bedrooms, bathrooms and the size of the house, it’s the whole picture," Russo said. "Just because your next door neighbor’s house sold for more doesn’t mean yours is going to sell for that price. Theirs could be updated while yours is outdated. Theirs can have a big, beautiful backyard and your might have little to no yard space.”
The home might sell for less anyway
Overall, overpricing your home will likely result in you having to sell it for a lower price than originally intended. The longer your home sits on the market, the more you're going to have to reduce its price to attract buyers. Then, the more you reduce the price, the less money you're going to end up getting for the sale.
"When you overprice it, people are not seeing the value because they do see what is currently selling and they do compare it to what else is selling. Why are they going to buy your house for more just because you want more for it?" Russo said. "Your home is worth whatever the buyer is willing to pay, and the buyer is willing to market value. Yes, market values are elevated and buyers are fighting for these homes, but they’re not going to pay something that’s so out of the ballpark from what else has been selling.”
Colligan said that while there's nothing wrong with inching your home's value up to a higher number, vastly elevating the price might not end up working the way you would have hoped.
"I would rather underprice a house and have clients that are thrilled with a bidding war than have over promised something and under deliver," Colligan said.
