One of the most difficult decisions for home sellers is the asking price. Many sellers expect their real estate agent to set the price for them, but it is not the agent’s responsibility to determine the asking price – that solely is the seller’s responsibility.
The duty of the seller’s agent is to provide counsel and data to the seller that is pertinent to the existing market, and price comparables to the seller’s home within his market. From this data, the seller needs to determine the price for marketing his home.
Sellers, however, often overprice their home or set a price at the highest end of what the market data indicates. Why do sellers have this tendency?
Reasons why sellers tend to overprice are as follows:
- Many sellers believe that their home is unique and thus can command a premium.
- Sellers often have strong emotional attachments to their homes, especially if they have lived in the home for many years and have raised family in their home. They let their emotional experiences override the rational market data and trends that their agent has provided.
- Don’t Want to “Give it Away”. Many sellers have seen other homes in their neighborhood sell and have a feeling that those homes were priced too low. Their feeling is, “I don’t want to give my home away.”
- Denial of Market Trends. Sellers often don’t fully accept the data provided by their agent. Their belief is that those “low numbers” (their view) pertain to others people’s homes but not theirs.
- Recapture Improvement Costs. Often sellers have remodeled or “updated” their home to various extent. They have paid the costs for these improvements and they believe there a 1-to-1 direct correlation between the money they have spent and the value these improvements add to their home. They do not realize that improvements often add significantly less value to the home compared to their costs.
- Financial Needs. Often sellers have financial needs that influence their pricing. Their view is, “this is now much money I need to net out after the sale.” This occurrence is especially common if the seller’s net proceeds do not cover the mortgage and/or other seller costs.
- Misinformation. Often seller’s discount the data or advice provided by their agent and instead place more validity in opinions given to them by neighbors, friends, family, the Internet, or other agents competing to become their listing agent.
Ultimately, sellers err by believing that they set the market for their house. The reality is sellers never set the market for any house. The market is determined only by what buyers are willing to pay. This often is one of the most difficult concepts for sellers to grasp. It often is a challenge for the seller’s agent to influence the seller with doses of reality and realistic expectations.