What's the harm in listing my property above the market value?
Have you ever heard a Seller say “Whats the harm in listing my property 10 or 20 per cent above the market value? The Buyer can always make an offer.”
There are a couple of things that happen when a residential home is overpriced.
First it helps sell the competition. Unless this is the only home on the market and a Buyer has no choice the chances of getting an offer are slim. Buyers will often look at 10 or 12 homes that meet their criteria and become educated as to what their dollars will buy in the location that interests them. If they do view an overpriced home they quickly compare it to everything they have seen. Often they will feel a sense of urgency to race back and buy something for much less that has the same features.
The second part of the overpricing problem is what happens if a Buyer does make an offer conditional on financing. The lender is obligated to protect the money it lends in mortgages. When the appraised value comes back the lender they tell the Buyer they will lend on their appraisal, not on what the Buyer offered.
And as time goes by the perceived value of the property goes down. See the attachment for a graph of how the Ottawa Market demonstrates this.
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Attachment(s): dom effects on sell price.JPG