One of my pet peeves is overpriced real estate. An overpriced home on the market can actually cost a seller a lot of money. A home only sells for fair market value (FMV), not more than buyers are willing to pay. That’s what FMV is–what a ready, willing, and able buyer is willing to pay for a home. Yet we still see both FSBO’s and agent listings on the market above FMV, and some are substantially above FMV.

If your home is for sale at a price above FMV, you can end up selling it for even less than FMV down the road. I’ve been preaching this for almost 20 years now, but finally there is authoritative proof. [See my earlier blogs on this: Save $10,000 Buying and Port Angeles and Sequim Overpriced Listings]

The proof is in the Sunday, October 28, 2007 issue of the Seattle Times at page E7:

“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.”

The article points out that a house that is priced right for the current market sells within a reasonable time, but one that is overpriced will sit on the market while the market prices decline, and when the home does finally sell, it sells for less than the FMV of that home when it was first on the market.

The statistical proof showed that in a market where a home that was listed for $599,900 (FMV) and which sold for $599,000 (almost full listed price within 30 days), a comparable house that was overpriced at $634,900 actually sold for $585,000 months later when the market had declined even a little more.

This is such an important lesson for homeowners who want to “test the market” with an excessively high price. Don’t do it. You could lose a lot of money by the time you end up selling it for much less in a slower market.

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