Overpricing. It happens all the time in real estate – especially in today’s market. I get where sellers are coming from because we’ve had so much glowing real estate news for more than five years. But that doesn’t mean we’re in a market where you can command whatever price you want.
Chasing the unicorn: Many sellers are pricing their properties too high. It’s as if they expect record-breaking prices and multiple offers every time because of how “hot” the market is. Homeowners get so fixated on the idea of a fiery market that they price for that one unicorn buyer who’s going to mysteriously pay more than anyone else. This “unicorn” will ignore all recent sales and listings and magically offer 10% higher than anything. In Sacramento the idea is a Bay Area “unicorn” will swoop in with fat stacks of cash and totally ignore similar comps that are selling for less. It’s nice when sellers get lucky like that, but in today’s market buyers are actually much more finicky about price. Despite a legitimate housing shortage we don’t have a market where buyers are willing to pay crazy prices that are totally disconnected from reality. In other words, we don’t have a market where pricing for the “unicorn” makes good sense (unless you want to sit on the market instead of sell). Take a look at the image below that shows price reductions over the past 24 hours in the Sacramento region. These 78 properties have been priced too high for the market.
My advice? Price for the real market instead of the unicorn. Give the most weight to similar sales and similar listings that are actually getting into contract.
Aspirational pricing: If you aren’t familiar with the term aspirational pricing, Jonathan Miller coined this phrase. It’s a great way to describe the phenomenon of sellers fixating on prices that are simply disconnected from the real market.
10 reasons why sellers overprice:
1) Hot headlines are imposed on the price instead of looking at comps.
2) Dissimilar sales are used as “comps” to price the home.
3) Too much emphasis is put on price per sq ft instead of actual comps.
4) A property is priced like it doesn’t have a busy street or adverse location.
5) Sales from a higher-priced area are “cherry-picked” to price the property.
6) The seller is too subjective and feels “my house is better.”
7) The owner believes the cost of any upgrades should be paid for by buyers.
8) A more aggressive trend from a lower price range is assumed to be present at a higher price range.
9) It’s a tricky property and not easy to come up with a price.
10) What else?
My article in Comstock’s: By the way, I wrote an article in Comstock’s Magazine this month on the value of upgrades. Check it out if you want.
I hope this was interesting or helpful.
Questions: Are you seeing sellers price for “unicorns”? What reasons do you think sellers overprice? Did I miss something?