Later, when you drop your price, your house is "old news." You will never be able to recapture that flurry of initial activity you would have had with a realistic price. Your house could take longer to sell.
Once your home has fallen out of escrow or sits on the market awhile, it is harder to get a good offer. Potential buyers will think you might be getting desperate, so they will make lower offers. By overpricing your home in the beginning, you could actually end up settling for a lower price than you would have normally received.
Next: Pricing Strategy