75% of Sellers Are Overpricing Their Homes. Here's How That Could Backfire on You

It may seem like a good idea -- but it's not.

Because the real estate market doesn't have enough inventory to fully meet buyer demand, sellers still have an upper hand these days. That means they can get away with charging higher prices than usual.

But that doesn't mean sellers can command exorbitant prices that in no way reflect the value of their homes. Between rising mortgage rates and a general dip in demand, the housing market has cooled enough that buyers are no longer willing to throw any amount of money at a given property. And sellers need to recognize that.

But many don't. According to a recent HomeLight survey, 75% of sellers are asking higher prices than their homes could reasonably be worth. And for many, that strategy is backfiring.

The danger of overpricing your home

The longer a home sits on the real estate market, the less negotiating power that seller has. If you overprice your home and no one bites, you might have to reduce the price a couple months down the line.

By then, you've already lost your edge. And once prospective buyers see that the price of your home has been reduced, they're apt to take advantage by making an offer below that level.

That's why it's important to be reasonable when coming up with a listing price for your home. And if you're not sure what constitutes a reasonable price, ask your real estate agent (or pledge to work with one rather than selling your home on your own).

If you really don't want to hire a real estate agent because you don't want to lose money on their commission, do a lot of research before pricing your home. Take a look at comparable homes in your area that have recently sold and see what those numbers look like.

Let's say you have a 2,000-square-foot home on a quarter acre of land with a fairly recently upgraded kitchen and master bathroom. If four homes that are similarly sized and updated in your area just sold between $540,000 and $550,000, you might list your home for $550,000 or even $555,000.

But if you list your home for $575,000, you may not get any takers. And then, when you reduce your listing price to $550,000, buyers might assume you're desperate enough that you'll accept an offer at $535,000 (which you may end up needing to do to get it sold).

A more limited upper hand

Sellers still have an advantage over buyers in today's housing market. But it's not the same advantage they had this time last year or earlier on in 2022. A number of buyers are pulling out of the market not just due to rising mortgage rates, but also because of recession fears. If you're looking to sell your home, it's important to recognize that -- and make sure you're attaching an asking price to your property that isn't likely to send buyers running the other way.