What happens if I set the price of a property too high?

The "shelf warmer effect": Why time costs money

The first two to four weeks are crucial. As soon as your listing goes online, it generates the most attention. Search subscriptions resonate with potential buyers who have been waiting for exactly the kind of property you're looking for.

If you set an unrealistically high maximum price for your property at this stage, the following happens: Potential buyers see the listing, compare it to similar properties, and move on. They don't get in touch. Your house doesn't generate any viewings, but merely "days on the market." If a property is online for more than three months, buyers become suspicious. They wonder, "What's wrong with this house? Why doesn't anyone want it?" The property becomes stigmatized. To generate any interest at all, you have to lower the price. But the signal this sends to the market is disastrous: You're admitting that the initial maximum price was wrong. Buyers now sense an opportunity and wait for the next price reduction or negotiate even harder. In the end, you often sell below the actual market value – the dream of achieving the highest possible price for your property is shattered.

The bank as a spoilsport in the highest real estate price

Even if you find a buyer who falls in love with your house and is willing to pay your asking price , the deal is far from over. In Switzerland, almost no one finances a property out of pocket. The bank plays a crucial role.

Banks assess each property using objective valuation methods (usually hedonic). If your maximum asking price for the property is higher than the market value calculated by the bank, the lower of cost or market principle applies. The bank will only finance the lower value. This means that the buyer must pay the difference between the bank's valuation and your maximum asking price entirely from their own cash assets – in addition to the already required 20% down payment.

An example :

• Your maximum price for a property : CHF 1.5 million
• Bank estimate : CHF 1.2 million
• Difference : 300,000 CHF

The buyer must have 300,000 francs in cash. This excludes up to 90% of potential buyers. Your maximum price for the property therefore drastically reduces your target group to a few very wealthy individuals. If you don't find them, the sale falls through, and you have to start all over again – with a "burned" listing.

Opportunity costs: The invisible loss

Those who insist on an unrealistic maximum price for a property often forget the ongoing costs. A house that doesn't sell costs money every month.

• Mortgage interest rates run further .
• Additional costs (heating, electricity, insurance) will apply.
• Maintenance must be performed become .

If the sale takes a year longer due to the wrong price, you might end up spending 20,000 to 30,000 Swiss francs, only to not get the highest possible price for the property in the end . Furthermore, you're tying up your equity. Could you invest the money from the sale profitably or put it towards your new home? A quick sale at a fair market price is often more profitable than waiting months for an unrealistic top price .

The psychology of "bargaining down"

If you start with an inflated maximum price for a property , you often attract the wrong clientele, or no one at all. If you later have to lower the price, it's often done in salami tactics: first by €50,000, then another €30,000. Buyers notice this. They lose respect for your pricing. A realistic maximum price for a property, on the other hand, signals strength.

maximum price for a property is often achieved through a defensive pricing strategy. If you set the price attractively (slightly below or exactly at market value), you generate many interested parties simultaneously. This creates a competitive situation. If three parties want the house, you can initiate a bidding process. This drives the price up, and you achieve the actual maximum price the market will bear. That's the difference between a desired price and the true maximum price for a property .

Online review vs. reality

Many sellers derive their maximum asking price for a property from online calculators or the asking prices of their neighbors. Beware: asking prices are not selling prices. Just because your neighbor listed their house for €1.8 million doesn't mean they actually got that price . They might have sold for €1.6 million. If you base your decision on unsold listings, you'll only repeat their mistakes. A valid maximum price for a property is based on transaction data, i.e., actual sales. Online calculators also don't take into account the specific location or any deferred maintenance. Blindly trusting these tools often leads to an inaccurate maximum price and ultimately to a dead end.

Conclusion

The strategy of "buy high, you can always go down" has failed in the modern real estate market. Artificially inflating the maximum price for a property wastes valuable time, stigmatizes its property as unsellable, and deters solvent buyers with financing hurdles.

The final sale price is often lower than what would have been possible with a realistic starting point. The true maximum price for a property is the point at which supply and demand meet optimally, creating competition among buyers. Greed is a poor advisor; realism is the key to success.

If you want to ensure that your asking price hits the market and doesn't miss, Loft offers data-driven analyses to help you find the optimal entry point.

Glossary

• Maximum price for a property: In the context of this article, this refers to the maximum achievable price on the market versus the often unrealistic asking price of the seller.
• Slow seller: A property that remains on the market for a long time due to an excessively high price and therefore appears unattractive to buyers ("burnt property").
• Lower of cost or market principle: A principle used by banks to base financing on either the purchase price or their own (usually lower) appraised value. This makes selling more difficult. excessive price.
• Opportunity costs: Lost profits or incurred costs (interest, maintenance) that arise because the capital remains tied up in the unsold house.
• Bidding process: A sales strategy in which an attractive starting price draws in several interested parties who then outbid each other to find the true market price.