Asking Too Much Could Freeze Up Your Home Sale

Sellers are often tempted to ask a higher price than they know their home is worth. "Perhaps someone will pay it." Highly unlikely. "Buyers will bargain us down anyway." Only to a point. In fact, overpricing your home is one of the biggest mistakes you could make. If you know what your home is truly worth, you should set your price no more than 5% higher. That's plenty of wiggle room when it comes time to negotiate. In some markets, even that may be too high. There are lots of reasons why overpricing won't work to your advantage:

1. An overpriced home doesn't attract buyers. Those who can afford the asking price know they can get more for their money elsewhere. Those who can't afford the inflated price won't bargain. They just assume the home is out of their price range.
2. An overpriced home loses the "new on market" advantage. A home sells best during the first 30 days after it goes on the market. A backlog of buyers is waiting in the wings to look at homes as they come up for sale. If your home is overpriced at the start, you'll lose these buyers-and you'll lose the 30-day advantage.
3. An overpriced home sells the competition. If your home is the highest priced in the area, it may have to sit there unsold until all the similar (but more realistically priced) homes have sold. Since new ones keep coming on the market, this could continue indefinitely until you reduce your price.
4. An overpriced home is difficult to finance. Even if a buyer is willing to pay the high price, an appraisal at that price may be difficult to get and lenders may balk at a loan commitment. This can endanger the sale weeks after the home is "sold."
5. An overpriced home gets "stale on the market." Buyers may think there's something wrong with your home if it takes too long to sell. Eventually you might have to reduce the price below market value to overcome that impression. You'd lose twice-a lower sales price and a slower sale.