Surprisingly, less profit often comes from asking too much. It seems counterintuitive: if I ask more, then I should get more, right? Not.
Same old story:
Let’s say you did some homework and came up with a “good” asking price, or you think the agents’ recommendations are low so you bump up the price. You figure you can always come down.
You get good action at your open house, but no offers. After a few weeks you drop your price. You wait. Then crunch time comes and you get nervous. Your new house is nearing completion, you want to get the kids settled into the new school or you found your dream home to buy–any number of reasons to sell fast.
You drop your price again, below where you should have started. The house becomes stale on the market. Your enthusiasm wanes. Kiss your higher sales price goodbye.
Move to plan B:
You just want to get it over with and move on. You have become discouraged enough to call your agent. She looks you squarely in the eye and says, “You tested the market with your price Einstein, so let’s price it where we can get this puppy sold.”
This price is usually below the original recommended price because time constraints have reshaped your motivations.
There are lots of variables that can force you to quickly drop your new asking price below the selling price you had expected. Setting too high of an asking price does not translate into a maximize profit.
Most owners will simply not heed this advice and overprice their home–even in today’s market. This is the time to sharpen your pencil. Set a realistic price. It’s a sure way to make your home attractive to the limited number of buyers.
Setting your price too low:
Price a home below value. You could receive multiple offers that will drive the price above market value. This may work in a hot sellers’ market.
Normally, when an offer is made, the buyers will give you a limited period (usually 24 hours or less) in which to respond to their offer. They know that without a time limit you could sit on it waiting for other offers or use it to shop for a better offer.
The laws in California promoted the sellers into shopping for offers and I think their ridiculous method of favoring sellers helped bring down the entire economy as it encouraged a buyer frenzy.