Mainline Home-For-Sale Tales: Happy Explorations of the Higher End of Market Value and Beyond

Lovely Landscaped Ranch is Hypothetical Sellers' Fictional Home

Mr. & Mrs. Hypothetical Mainline-Area Sellers have decided to list their home for sale with Prudential & R5Realty.com agents, Ted Gross and Heather Gross. Through analysis of recent comparable sales, current inventory, and awareness of the current market climate, it is evident the likely perceived market value of their home by potential buyers, buyers' agents and appraisers/lenders is about $475,000 - give or take a couple percentage points.

To affect a sale in a reasonable amount of time, skipping the drudgery of fruitless showings, price reductions, and life lived in limbo, prevailing wisdom indicates the Sellers adopt a list price of $500,000.. Since a vast majority of quality Mainline-area homes in this price range will sell at about a 5% discount to list price, a $500,000 list sets up a logical bridge to the target market value of $475,000, while still giving Sellers the opportunity to attract a premium price over market value.

In this case; however, the Sellers are a bit unconventional. They've got the means, patience and endurance to put a high bounty on their home. While a smooth path to victory here is unlikely given the current economy and housing market, there are potential scenarios where one can see the Sellers' overpricing strategy prevail as a winning gambit.

If $500,000 is conventional widsom's starting Asking price, a number from $525,000 to $549,000 enters the range of overpricing. For sake of argument lets say, they the Sellers settle on $539,000, which addresses the $525,000 that their neighbors, Mr. & Mrs. R.E. Bubble, got for their identical home in the long-gone boom days of 2006.

In a best-case scenario, the Sellers might strike a deal  with the refined buyer,  Mr. I. Overpay, who is an out-of-towner, wrapped in cash and strapped for time. He loves the house and doesn't have the time, interest, or energy to shop for a more competitive deal, and he settles on a purchase price of $535,000, which is even more than the Bubbles got in the hey-day... The Sellers celebrate their saviness and willingness to explore the highest possible returns. They are fortunate Mr. Overpay has a large cash position, since a lender-ordered appraisal will likely be in the $500,000 range at best and this would likely throw a hefty wrench in the deal.

Always Counter: Even when Horrified.

Another potentially upbeat outcome to aadopting a high list price - and one which is more likely than the lottery-esque best case scenario above-  sees  the Sellers again going with the leave-nothing-on-the-table $539,000 ask figure. While this intimidating list price discourages some buyers from the usual 5-10% below market-value opening-offer, Mrs. Letts C. Whatapens does present a very-fair offer of $479,000. At first-glance, the Sellers are horrified and insulted, but they take their agents' advice and make a counter-offer that includes a small reduction down to $530,000... Mrs. Whatapens is disappointed but at least the Sellers' move has opened a dialogue and an opportunity to negotiate.

Over the next month, Mrs. Whatapens comes up a bit in her offer amount. Meanwhile, the home remains on the market at the high list-price and attracts (as-to-be expected) few quality showings and no other offers. Then the Sellers and their agent learn that another home in the neighborhood is soon-to-be-listed for a non-astronomical price, say $499,000. At this point, Mrs. Whatapens' very generous offer of $490,000 (significantly above the pre-determined market value of $475,000) is starting to look like a bird-in-hand versus none in the bush. The Sellers lower their demand to $500,000 and an agreement is struck at $495,000.

Bottom line, is that by planting their price tag at the high-water mark from the get-go, the Sellers left themselves plenty of room to appear generous in negotiations, and they leveraged and lured the Buyer into a gravitational pull toward the uppper-spectrum of market value. Better yet, the Sellers were not left wondering or with regrets at what might have happened if they had explored a very high list price. In this case, aiming high didn't produce the fantasy scenario of a rabid Mr. Overpay, but it still produced the very desirable outcome of a higher than expected sale price.

 Utley: Has cash but too practical to overpay 

Both of these examples fall into the category of Best Case Scenarios. The Ovepaying cash-buyer is pretty much a fantasy, and the buyer who stretches significantly upward is quite uncommon these days. Typically, in today's housing market, pricing your house significantly above market value will attract a Cold Shoulder from buyers,which translates into an extended stay on market and showing requests that are ultimately a nuisance as they have little hope of generating an offer toward a daunting list price. More unfortunately, the house can become tired and stale in the eyes of prospective buyers and agents. The new kid on the block always has more luster than the been-there, done-that listing.

Nevertheless, there is something to be said for letting Buyer Indifference, rather than self-limitation, speak to the potential folly of overpricing a home. At least, if you put the price out there and get no good reply, you aren't left with regrets. And, of course, you might hit upon a dream buyer like a Mr. Overpay or Mrs. Reach Upwards... However, the typical scenario is that overpriced homes often linger and languish on market, ultimately attracting a lower price and higher degree of frustration than they would have if originally priced sharply.