The most important thing to do when selling your home is to determine how to best accurately price your home [link]. Getting an accurate price is a delicate balance of comparing the sold data to the subject property.
In the diagram below, you can see that homes which are listed at their Just Right price, are usually purchased by the time the average number of days on market have elapsed. Homes which are priced too high, have an above average time on market and will likely not sell until the price is lowered. Homes which are priced too low, lead to multiple-offers and a short time on market.
Overpricing can occur when owners are not objective in pricing their home and brokers go along with it to get a listing deal. The other way overpricing can occur is when brokers convince owners that they can sell the home for a higher price than other brokers.
Underpricing occurs when brokers shirk their responsibilities to price accurately and leave homeowners with the bill. An underpriced home will sell quickly, as buyers race to get offers in on a good deal. But a good deal for buyers is never a good deal for sellers because the rush leaves out buyers who take their time. Sellers are told that getting choices associated with multiple offers is good, but the reality is that homes sold this way go for much less.
It is hard to estimate exactly how much money sellers lose from under pricing but multiple academic researchers have attempted to quantify these amounts. The Stanford Study found that home sellers might lose as much as 5.9% to 7.5% due to under pricing [link]. Sverson & FRIEND? note that when real estate agents sell their own homes, they do so by pricing them 3.8% higher and leaving them on the market for another 9.3 days [link].