Bad Idea to Overprice a Home

November 20, 2007 on 3:33 pm | In Home Pricing |

Overpricing a Home Can Lead to Lower Results
by Kathleen Lynn, THE (HACKENSACK, N.J.) RECORD, Sunday, November 18, 2007

HACKENSACK, N.J. — Real estate agents often warn sellers about the danger of overpricing a house. Now, they have evidence to show skeptical clients: research by Jeffrey Otteau, a New Jersey appraiser.

He found that in a market where prices are declining, sellers who “test the market” with a high price usually end up with a lower price than those who price realistically.

“Houses that are priced right are selling,” Otteau said. “Overpricing extends days on the market and guarantees that you will sell your home for less in a declining market.”

Otteau, of Otteau Valuation Group Inc., studied about 4,500 home sales that took place in the first half of 2007, largely in northern and central New Jersey. Most of the houses were priced between $500,000 and $750,000.

He looked at houses that sold in less than a month and found that they had a median asking price of $599,900 and sold for almost full price; the median was $599,000. When he looked at houses that lingered on the market for more than a month, however, he found that they were priced higher — at a median of $634,900 — but sold for less than the lower-priced homes, a median of $585,000. The median is the point at which half the sale prices are above and half are below.

Otteau said that pricing a house below the competition stirs up interest and reassures buyers that they won’t kick themselves later for overpaying if home prices drift lower in 2008.