One of the first things I was told when I started working as a real estate agent is that I had a solemn moral and ethical obligation to scare the #@%*^ (daylights) out of sellers about the dangers of over pricing their homes.
Grizzled veterans explained that over pricing a home leads to many bad things: fewer showings, longer time on the market and ultimately getting less than full market value for the property. It also contributes to obesity and global warming!
Okay – I’m exaggerating. The part about fewer showing probably is probably a stretch.
Seriously, though, it is conventional wisdom in the industry that over priced homes eventually sell for less than full market value.
Sellers are often shown this chart from data publishthe National Association of Realtors to confirm this fact. Some sellers priced right and sold in less than 30 days for about 2% under asking price. Other sellers priced too high, sat on the market more than 90 days and were punished by having to take 10% less than asking price.
Well … not so fast. Here is another chart. This is research I did on a suburban area including parts of Littleton, Englewood and Centennial in the metro Denver area. It covered almost 500 two-story homes with 2000 to 2800 square feet that sold over a six-month period in 2011.
Pretty startling! Regardless of days on market, these homes were selling between $341,000 and $345,000. The houses that took more than 90 days to sell got 10% less than their inflated asking price but still ended up selling for the fair market value in the low $340s.
So the real estate industry is just flat wrong about over pricing. All things being equal, over pricing is not going to hurt you financially as a seller.
On the other hand, over pricing does not help either! On average, the people that started with higher asking prices did not accomplish anything by doing so. They eventually had to come down to the market price range to get their places sold.
Rethinking the conventional wisdom in real estate is one of our passions at Colorado Home Realty. We ask continually if the old rules of thumb are really true. By doing so, we are discovering that some traditional approaches are wrong and we are innovating new approaches that make your transaction faster, safer, more enjoyable … and more profitable.
Because “thinking outside the box” is too conventional for the innovation we value.
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