Overpricing Your Home in a Declining Market:You Risk Chasing the Market Down

A couple of days ago, I wrote a post on "biggest seller mistakes". Overpricing the home is an extremely common problem - whether it's because the seller believes what one agent is claiming (with the other three interviewed all coming in 10% less) or it's because of denial about market realities. No matter what the cause, it is a dangerous and expensive mistake to make.

I advocate choosing the agent first and then working on pricing together, rather than hiring the agent based on the price that he or she suggests is the probable buyer value. But it's very hard for sellers (whether in Los Gatos, Saratoga, San Jose...or Mars) to resist the temptation when one agent suggests that he or she can get you more for the home (than it is really worth).

Right now, it's a deep buyers market in much of the US and certainly in most of California. As the number of short sales and foreclosures rise, prices get pulled down. We're not yet done with the tide of foreclosures and short sales, so we expect this basic buyers market to continue for awhile.

What's the risk of overpricing now, in this current market in Silicon Valley, or anywhere in the San Francisco Bay Area? It's considerable! There's a name for it, "chasing the market down".

Recently I read a fantastic post by an agent friend of mine, Laurie Manny of Prudential in Long Beach, CA. Laurie's article is titled, "Chasing the Market Down - Are You Guilty?"  Laurie does not mince words and I strongly suggest that potential sellers have a serious look at her blogpost on this timely topic.

Sellers are always worried about underpricing their home. "I'm not going to give it away" is the underlying feeling. What happens if you accidentally underprice your home? Most of the time, you get multiple offers.

Last weekend, I showed 6 homes to buyers in three areas of San Jose: Blossom Valley, Santa Teresa, and South San Jose. All six were short sales (we were not looking to find a short sale, but that's what was available in my buyers' price range). We bid on one and guess what? That house got multiple offers - six in all!  (And it received multiple price reductions before it hit that point where buyers reacted strongly.) Underpricing concerns? I would not stress about that too much. Overpricing is the thing to worry about!