Why you shouldn’t overprice a listing 
Amber McCulloch
August 9, 2022 — Read in 4.1 mins · 815 words

In the last year, we have experienced one of the strongest seller markets to date. Home values soared; listing prices skyrocketed; winning buyer bids were way over asking price. Now that the market has started to cool, we are seeing increasing market time and more price reductions. Your sellers might want to shoot for the sky, but in this climate, overpricing a listing could drive away serious buyers and could actually result in a lower selling price than if it had been originally listed at market value. Our goal as real estate agents is to take all the current market factors into consideration, along with the unique features and condition of the property and advise our clients on an appropriate listing price. 

There’s a psychological aspect to the home search process, and we, as agents, see (time and time again) that a home’s appeal diminishes after about 21 days on the market. Listing a home too high may cause it to linger on the market. This extended market time and the inevitable price reductions might cause potential buyers to think that something is wrong with the property. It’s in the seller’s best interest to list the property at a reasonable, accurate price from the start so that you don’t waste valuable market time. The right price will ensure that the listing is visible to the right buyers right away. 

So, what do you do when your client has unrealistic price expectations?

Show them the research

Your recommendations should be based on your experience and your detailed analysis of the local market. When doing your listing presentation, come prepared to show them the research that backs up your recommended listing price. 

One of the most important services real estate agents perform for our listing clients is conducting a detailed Comparative Market Analysis (CMA). Here are a few tips to ensure that your CMA is as accurate and relevant as possible:

  • Limit the CMA search to homes sold within the last 3 months within a ½-mile or ¼-mile radius of the property. 
  • When choosing your comps, pay attention to neighborhood dividing lines, school districts and physical divisions such as streets and freeways.
  • The square footage of the comparable homes should be within a 10% variance of your client’s property and should have similar features, layouts and other details.
  • Make sure the comps were built in the same area as the home you’re listing.
  • Factor in renovations, updates, and repairs that your clients have made to their property vs the comparable homes.

Educate them on local market conditions

Talk to your clients about the current market conditions in your area. At the height of the recent seller’s market, we saw rampant aspirational and “make me move” pricing. And as inventory got scarcer, many of these listing sold at their asking price or higher. But local market conditions shift quickly and with the increasing interest rates, buyers are much more cost-conscious, and demand has cooled a bit. 

To help paint the picture, compare original list prices of recently sold homes with their final sale prices. Analyze that along with the number of days on the market and the number of price adjustments that were made. This could serve as a reality check to your clients and help them understand why you’re recommending a certain listing price. 

Agree to aspirational pricing cautiously

If you’ve done your research and have educated your clients on the current market conditions, but the seller insists on an unrealistic or aspirational listing price, here are four ways you can handle it:

  • Propose a compromise: You agree to list the property at the higher price with the understanding that if they don’t get an offer within two weeks, you’ll drop the price to your recommended amount.
  • Agree to a pre-arranged price reduction schedule.
  • Suggest that you test the waters on the higher price by putting the listing on the private network and see who bites. That way, you can adjust the price before you go public.
  • Suggest an appraisal. This provides an impartial professional opinion on the value of their property and could help them see that their expectations are unrealistic.

If a seller prices their home well above market value and it goes under contract, make sure they understand that there’s still a chance it will appraise lower, disrupting the buyer’s financing and causing the deal to fall through.  

Ultimately, the decision isn’t up to us. As real estate agents, it’s our job to advise and educate, so focus on doing the research, educating your clients on local market conditions, and making recommendations that are based on evidence and thoughtful analysis.

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