Chad makes this point beautifully. I like the "best if used by such and such date" part of his post. I also think the milk, meat and bananas analogy is applicable.
This past weekend marked a momentous event. My mother-in-law (who I must add is an extraordinary woman) turned an age that ends with a 0 and starts with a 6. (No, not 600.)
We had a great celebration. My wife's grandparents came to town and we celebrated my mother-in-law's amazing life, generosity, and ever increasing wisdom. We watched a slide show that included embarrassing pictures of my wife in middle school, so that was a blast. (Imagine my wife now punching me in the arm.) And we reflected on getting older.
My mother-in-law has aged gracefully. She has continued to learn. She challenges herself daily to help others and to live an outstanding life. She is well poised to enjoy great years going forward.
However, aging well is not a given. Some things age well and others don't. Cheese ages well. A fine wine only gets better with time. A painting by Picasso or Monet only gets more valuable with each passing year.
Contrast these items with things that DO NOT age well:
Milk left on the counter
Popcorn left out all night
Meat that is not refrigerated
Real estate listings
Real estate listings do not age well. The "best if sold by date" on a real estate listing is about 30 days. When your house goes on the market, there are buyers that are actively looking for houses. Every day they are checking out homes that come on the market--searching for that perfect house.
If your house is priced too high for the market, it won't sell. A house that is priced higher than what the market dictates is competing with houses that are larger, newer or have more amenities. Your house doesn't even show up in a buyer's search because they are looking at similarly featured homes that are priced lower than yours.
Time passes and you drop the price. You get a little interest, but it still doesn't sell. Now you are 120 days into your listing and you drop the price again. You are chasing the market down, trying to get ahead of the curve. Meanwhile, more houses have come on the market and you constantly face new (exciting) competition.
The market hums along and still no sale. Real estate agents and buyers start to ask, "What's wrong with this house? Why hasn't it sold?" Usually, the answer is because the house was priced too high to begin with and the listing missed that sweet spot of buyer consumption.
You start to run out of time. So you've got to offer your house at a bargain price in order to generate fresh interest and excitement. Usually, this price is lower than you could have sold house for if priced right to begin with. (Think of the bargain price meat at the market that must be sold today!) Your house still gets sold, but the whole process takes longer and costs more.
Pricing a home correctly for the market is the best way to get a house sold quickly. Find out what the market price of your house is when compared to similar properties and price it at the low end of that range. When buyers look at your house, you want the price to generate excitement. It needs to rise to the top as the best option for any buyer in its price range.
Of course, houses will still sell after they have been on the market for a long time. It happens all the time. The right buyer comes along and the house is sold. But meanwhile, time has passed. You've continued to pay your mortgage, insurance, taxes and maintenance. You've dropped the price. Ultimately, you don't make more by pricing it high to begin with and often you'll make less.
By the way, if you do have a house that has been sitting for a while and your agent has suggested you look at the price...just do it. Get it priced right and get it sold. Don't wait. An aged listing, like aged meat, just doesn't get better with time.
Chad D. Board