Overpricing can cause problems later, he said (Image: Mike Kemp, In Pictures via Getty Images)
An expert has revealed why setting an inflated price on your property can end up costing you money.
Many homeowners assume pitching high on their asking price provides them with negotiating flexibility further down the line. However, according to mortgage expert Shaun Sturgess, overvaluing a property could frequently backfire spectacularly and ultimately leave sellers significantly out of pocket.
In a more sluggish and price-conscious housing market, buyers are growing increasingly wary of homes that seem overvalued compared to comparable properties in the area. While some sellers hope ambitious pricing will maximise their profit, Mr Sturgess said it often produced the opposite result.
Mr Sturgess, director at Swansea-based Sturgess Mortgage Solutions, said: “Overpricing rarely gets you more. More often, it gets you stuck.
“A home listed above market value tends to sit there while sensibly priced properties around it sell. The longer it lingers, the more buyers start assuming something is wrong with it.”
Sellers have been cautioned (Image: Justin Paget via Getty Images)
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According to Mr Sturgess, the initial few weeks following a property going on the market are frequently the most critical phase of the entire sales process. This is when listings typically attract the highest levels of online traffic, the strongest buyer engagement and the greatest number of serious enquiries.
He said: “The first two to three weeks are everything. That is when you get the most views and the most genuine interest. If you pitch too high and waste that initial momentum, it can be very difficult to recover later.”
One of the most significant pitfalls sellers encounter after overpricing is eventually being forced to slash the asking price publicly. While many homeowners regard a price reduction as a routine part of negotiation, Mr Sturgess cautioned that it could actually undermine a seller’s position considerably.
He said: “Once a property gets a ‘reduced’ tag attached to it, buyers immediately start smelling weakness. They often come in with even lower offers than they would have made originally because they assume the seller is now desperate or under pressure.”
Shaun Sturgess (Image: Newspage)
In numerous instances, he believes sellers who overprice at the outset can ultimately end up accepting less than they might have achieved had the property been marketed at a realistic figure from the start. Mortgage valuations can also create serious complications for overpriced homes.
Even if a buyer agrees to pay an inflated sum, the lender’s surveyor must still independently determine whether the property is genuinely worth the agreed price before sanctioning the mortgage. Should the valuation come in below expectations — known as a “down valuation” — buyers may suddenly find themselves needing a larger deposit, or the deal may fall through entirely.
Mr Sturgess said: “Inflated valuations can completely sink a sale. A buyer might love the property and agree the price, but if the lender values it lower, the numbers no longer work and months can end up wasted for everyone involved.”
He also cautioned sellers to be wary of estate agents who promise unrealistically inflated valuations simply to secure their business.
Mr Sturgess added: “Some agents are more interested in winning the instruction than actually achieving the sale. Plenty will flatter vendors with wildly optimistic figures just to secure a contract, particularly larger corporate agencies working to sales targets.”
According to Mr Sturgess, sensible pricing can frequently spark far greater competition amongst prospective buyers.
He said: “If a property is priced properly, or even slightly keenly, it can create real momentum. You get more viewings, stronger competition and sometimes offers at or above asking price. Going for gold from day one often achieves the exact opposite.”