Listing a property above fair market value to see what happens. Great idea, or BIG mistake?

  • May 24 2011 - Naples
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Answers (17)

Profile picture for user569487
I have seen the "auction effect" referenced in another comment.  On HGTV only. I haven't seen that in our area.

I agree that sellers should listen to their realtors and price it right, but since they are obviously not doing that where we live, pricing a well maintained property above market value is a competitive move.  Updated and well maintained sells.  Putting top dollar on garbage properties no matter where they are located makes the updated property far more desirable.  And more cost effective in the long run. 
  • March 16
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Pricing a home too high is very tempting and most sellers are happy to price it above market value thinking that they will get more. This is almost never the case. When you price a home just below market value you can get an auction effect. This in turn drives the price of the home higher that the list price in many cases. It also reduces the time on the market. Buyers find value in a home the same way that everyone else finds value in something. If you want to buy a TV and the price of brand A is $600 and has certain features and brand B has the same features plus a larger screen and is at $579 you will buy the brand that costs less and has more features. Sellers often get too attached to their home as they have lots of memories. They value the home more than anyone else. This is understandable but ends up costing the seller time and money. Be smart and follow your Realtors advice. Price it right!
  • March 16
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BIG mistake. Is it really in your seller's best interest to put a home on the market you know is over priced? It is going to cost them time and will ultimately result in a lower offer than if it had marketed correctly to begin with. 
  • March 16
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Profile picture for user569487
Houses on the market are typically overpriced, at least in our area.  The sellers will put top-gouge price on a property that hasn't been updated for forty years.  That's a huge problem and one reason many listings are stagnant.  To those sellers, I would say upgrade your property or lower your price.  It isn't fair to gouge a buyer who has to spend $40,000-$100,000 to renovate in addition to your top asking price.  

There is more to property value than which neighborhood you live in and whether there are 3 or 4 bedrooms.  The overall condition of the house is a HUGE deal:  Are the majors like a roof and heat pump new?  Is all the painting recently done?  Is the property low-to-no maintenance and move in ready?  People ARE willing to pay more for that convenience, and they should be.  If I have to choose between a compromised house for $219,900 or a beautifully decorated and renovated home for $239,900, I will gladly pay that difference whether the higher priced home exceeds the market value or not.

To homeowners who invest in their property and maintain it over the years - you should be able to get that investment back.  If that means you price in excess of "fair market value", so be it.  This buyer is willing to pay for that convenience. 





  • March 15
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Profile picture for sunnyview
I was shocked to see that an agent posted this question. I hope for your clients sake that you already know the answer.
  • May 26 2011
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Profile picture for Blue Nile
It is an "excellent" idea if market value is doubling every 2 months!

It might have been a reasonable idea when the market was rapidly rising, but the bubble is still deflating.

It is a "good" idea if one has no intention of selling unless someone "desperate" for the specific house comes along, or if one just wants to tell all those cold calling agents that it is already listed and that they are violating the NAR code of ethics by trying to steal a client.

It is not a "bad" idea if the intent is to completely trash the reputation of your agent.

It may be a "helpful" idea if you can get multiple properties in an area listed well above market value in order to get something else sold quicker at a reasonable offer.

If you are a "developer", it may be a "necessity", to keep other properties in the development that were already sold from losing their value.  The developer can often make up the difference by throwing in concessions.

The big problem for sellers doing this without forethought is that an appraisal contingency could force the offer amounts down, and could prevent a sale for what the seller desires, especially in a timely manner.
  • May 24 2011
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Profile picture for Frieda Triebel

It is a mistake!

  • May 24 2011
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Profile picture for MikeParkerCRS
I guess the big questions are how much above "Fair Market" and who set the "Fair Market" number and what part of the country you are in.

If the "Fair Market" number is from a one month old appraisal and you are not in a major REO market and you are 5% or less above the appraisal, you might and repeat might get away with it.

Each market place is different in what takes a normal time to sell.

For example, Northern Kentucky in a good market was 4 to 6 months to sell, right now we are 6 to 10 months.

It can be done, but the seller and agent need to watch the market very carefully and if they see the market changing for the worst, then the seller has to get in front of the market as fast as possible.

Very dangerous game, but can be done!

Mike Parker - CRS
  • May 24 2011
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It depends ...

Do you want to list your house for sale, or do you want to sell it?

In today's real estate market, the buyer, not you, determines the appropriate selling price.

By listing above fair market value, all you're doing is listing your house for sale.

If you truly want to sell it, you need to compare your home and the listing price with other homes on the market. All else being equal, if your home is price higher than another home that is similar to yours, the other home will sell - yours will not.
  • May 24 2011
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Profile picture for mckylie
Waste of time.....
  • May 24 2011
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Profile picture for Dunes....
Who's Plan/Idea/Experiment is this?..The Client or the Agents?

The Client it seems would be playing the Lottery with their Business Transaction..their choice

Seems to me the Agent (if it's their idea) would be playing the Lottery with their Clients Business Transaction..
If an Agent talks a client into this "Plan" I would have serious doubts about their "Expertise/Value"..Play the lottery with your own money would be my thinking

  • May 24 2011
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A common mistake sellers make is to assume that starting with a high price will net them more money after the sale.  I think they feel that if an offer is made and they "split the difference" (another misguided concept), they may get what they wanted.

The reality is that the home will get few, if any, showings and no offers.  After it is on the market for months or years and the price is lowered, the seller may get offers, but they will be lower than they would have been if it was priced correctly to start.  What the seller expected, turns out to be the opposite.

This is also the thinking when seller choose to sell FSBO or flat fee service because it is less cost.  It seem to make sense that when the home sells, they will save x%.  This would only be true if the home sold for the same amount.  It likely will sell for less and they net less money.
  • May 24 2011
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Profile picture for hpvanc
As a buyer, if it is very much above the market I'm not going to bother looking at it.  If it is only some above, I may make what the seller considers an insultingly low offer around market value. 

The only people that are going to buy above market value are cash buyers that have had a sudden windfall.  How many properties are purchased by lottery winners or recent heirs of a long lost uncle?
  • May 24 2011
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I can already "see what happens." It won't sell. In this market, you have to price aggressively to compete with the short sales and foreclosures. It's my opinion that an overpriced listing is a waste of time.

Good Luck!
Sinead
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  • May 24 2011
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I would say-depending how much above market value. If it is only slightly above (usually to have a "room" for negotiation) may be acceptable, in other cases when the listing price is way above fair market value-I consider it a big mistake. Most likely there will be no showings, no offers etc.and the purpose is to sell-isn't it? Unfortunately for sellers, buyers do not care how much is owned to the bank, how much a seller spent on remodelling etc. The buyers will pay what they believe is a fair market value even if this means for the sellers to sell a property at a loss.
  • May 24 2011
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Profile picture for wetdawgs
Major mistake!
  • May 24 2011
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It depends on the price-range. In a lower price range where most people would pay cash and not get an appraisal, you can get away with it if the property shows well and has a "Wow Factor". However, in most cases it's a mistake. First two weeks on the market are the most important time, and it's important to price it right, otherwise you will have a stale piece of inventory on your hands.
  • May 24 2011
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