Home Sellers Are Pricing Too High and Not ‘Listening to the Market,’ Experts Warn

Home sellers with unrealistic price expectations are setting themselves up for pain in a softening market that increasingly favors buyers, warn housing market experts.

Nationally, the share of home listings with price reductions hit another multiyear high in April, indicating that sellers are increasingly overestimating what their house will fetch in the current market.

Although the problem is deepest in the South and West, nearly every state has seen an uptick in price reductions compared with a year ago, according to Realtor.com® data, signaling a widespread trend.

Despite these warning signs, seller confidence remains staggeringly high, with 81% of potential home sellers predicting they would get their asking price or higher in a Realtor.com survey conducted in March.

“The rising share of price reductions suggests that a lot of sellers are anchored to prices that aren’t realistic in today’s housing market,” says Realtor.com Chief Economist Danielle Hale. “Today’s sellers would be wise to listen to feedback they are getting from the market.”

Listing agents say they hear unrealistic price expectations most frequently from sellers who bought their homes during the frenzy of the COVID-19 pandemic-era housing boom, when bidding wars were common.

While market conditions have changed, most of those sellers likely have healthy equity following a surge in home prices, and still stand to gain handsomely on a sale even if they don’t achieve the price of their dreams.

“Even after setting a more grounded price, they are likely to walk away from a sale with good money in their pocket,” says Hale.

Adjusting to market realities

For home sellers accustomed to the soaring home values of the pandemic-era housing boom, the new reality of flat or softening prices and weak demand can be a bitter pill to swallow.

However, overpricing your home based on a gut feeling or wishful thinking can be a dire mistake, says Toni Zarghami, co-founder and director of business development at Zarghami Group, a Keller Williams real estate firm in Sarasota, FL.

Zarghami, a listing specialist, says she frequently encounters sellers who mistakenly believe that routine cosmetic updates such as fresh paint or new molding will command a significant price premium over other homes in the area.

“They very much think that their property is better than everyone else’s,” she says. “On HGTV, when you landscape and paint, and add new light fixtures, you just added 20 grand to your list, right? But that’s just not the way that our market is.”

Zarghami says that in the current market, cosmetic updates can help a home sell faster, but they are unlikely to raise the sales price, unlike value-adding features such as a pool or lakefront location.

The listing agent says she works closely with sellers to set a realistic price at the outset, and isn’t averse to turning down clients who won’t budge on a price target that is out of reach.

“Selling a house is like running a marathon, and when you choose to price too high, you have let every other runner get 20 miles ahead of you before you even take your first step,” she says. “It’s almost impossible to catch up.”