Sellers Often Price Homes Out of Market : Emotionally Involved Owners Ask Too Much

It came to be known to realty agents as “the pink house” because of its owners obvious adoration for the color. The home contained plush pink carpets, pink satin draperies, hard-to-find pink marble flooring, a pink fireplace and pink furniture.

The owners had put thousands of dollars into pink furnishings and loved living in their rosy residence. So it was only natural that when it came time to sell, they assumed would-be buyers would share their taste and priced the house accordingly. Regrettably, for what they asked, nobody would buy.

Owners of the pink house had fallen victim to what is known in realty circles as “ego pricing.” Many a seller is so captivated by his property--or so convinced he should be compensated for his improvements--that he demands too high a price. The punishment for greed? Usually a house that sits on the market endlessly, moving only after it takes a deep discount.

Unrealistic Pricing

“Everybody’s home is their castle and therefore sometimes people aren’t realistic about pricing it,” says Andy Mirabole, who sells homes in Baltimore.

For sellers, it can be an ego-bruising but important lesson to learn: that, regardless of what they want or expect to get out of a property, it’s the market that ultimately sets price. The lesson is especially important in markets facing slow sales, which these days are numerous in various parts of the country, despite the recent easing in interest rates.

Even the Washington area--once among the most torrid of seller’s markets--has settled into a period of “leveling prices,” allows Annette Potts, a real estate agent in Annandale, Va. No longer can sellers assume automatic jumps in the value of their property, she says.

Entering a sluggish market with an overpriced house can be a serious blunder, says Margaret Monaco, who has sold real estate in the New York suburb of Nutley, N.J. for 15 years. “The market here is bad right now,” admits Monaco, noting that an abundance of homes are for sale and most take six to nine months to move.

Of course, there are special pricing situations. Even now, owners of properties in highly prized hamlets where houses seem always to be keenly coveted may get away with pricing a property a bit above what the market has been bringing for like homes.

But testing to see what the market will bear is a bad idea in most neighborhoods, realty agents advise. A house that’s priced too high in the beginning and then lingers on the market could actually bring less than the properly priced home which goes in a snap, Mirable cautioned.

Painful Chore for Agent

Since so many sellers believe that their homes are worth more than they are, the pricing process (known as a market valuation) can be a painful chore for a realty agent. Agents typically price a home on the basis of three or more “comparables,” which are similar properties that have recently sold. Then they adjust for special features of the house in question, appreciation and the level of competition in terms of other houses for sale nearby. In the end, the agent recommends a price range, though it’s up to the seller to decide.

The problem is that sellers are emotionally wrapped up in their residences and lack objectivity. The owner of the pink house, for instance, assumed that others would share his taste. In fact, homes decorated in neutral colors, beiges, grays and whites, have broader appeal, and the seller of a pink palace could actually be docked by the market for his color choice.

By the same token, many sellers falsely assume that they’ll be compensated for expensive features added to their homes, such as swimming pools, though that’s not always the case. Many buyers are put off by the upkeep on a pool or view it as a safety hazard for small children. While some improvements--such as updated kitchens and bathrooms, painting and carpeting--pay off at the settlement table, many sellers are mistaken in figuring all their outlays will be returned.

Another reason for seller confusion over price stems from information they collect about what’s sold in their area. If you drop by at an open house, you can be awed by the asking price for a property, failing to realize that ultimately the buyer got much less. Or you may hear exaggerated reports from neighbors as to how much they’ve fetched from the sale of their homes.

“It’s the realtor’s place to tell the person face to face that their home is not worth as much as they think,” says Janet R. Gregory, who sells homes through the Coldwell Banker chain.

Some sellers are so disappointed by the price suggested by an agent that they’ll seek out another that will recommend a higher price.