"Bulls get rich, bears get rich, but pigs get slaughtered"
What is it that people say about the stock market? Things are only worth what they're worth, and real estate is no different. If a seller tries to take advantage of a tight market by overpricing, it might work, but, more times than not, it won't. If it does work, it will usually be because multiple buyers are bidding on the same property.
Even then, reason mostly prevails, often the next morning, or when the appraisal comes in. Although many people are either downsizing, or have saved extra money during the past 18 months, they still will be resistant to paying over the appraised value, despite what they might be putting down (which could even be the whole amount). Even cash buyers regularly ask for appraisals, just to check that they are not "overpaying". Although we know that that's a subjective term, and that appraisals can lag in a rising market, people still want to be validated for their business judgment. If they think they may be getting taken advantage of, they will balk at some point.
Bidding War Blues
Lately, we've been seeing a good number of homes coming back onto the market, after going under contract. Sure, there are some bad inspections, and some mistakes about how much can be financed, but there are also cold feet, and they often relate to the aftermath of a bidding war or feeding frenzy. Buyers get caught up in wanting to "win" the house, then wonder whether they have overpaid.
All of this is by way of saying that sellers, who have a short selling season for the next two months or so, should be wary of overpricing. A good value will get snapped up, and will sometimes even have backup offers, but a property that looks to buyers as though it will sit for a while may do just that. If there's no perceived risk of losing the purchase, there's no urgency. And we all know that lack of urgency kills transactions. Thinking too much about anything will bring out all the negative points. So don't go there. Price your home to sell. Listen to your agent. You'll thank him/her later!