A reasonable Price Tag?
Most people do not have the slightest idea of how to price their property correctly. It will always be a dilemma for anyone who is at any time involved in real estate and is so significant that it can make or break many a good deal.
Peter Redgard owns a house in Bloemfontein with a market value of R1.15mil. He decides to put it on the market at R1.3mil, justifying his decision by: The house just around the corner has recently been sold for R1.1mil, therefore I might be lucky and get at least R1.3mil or we want to upgrade in size/area, but this property must be sold for such an amount that our bond repayment do not increase or even I have made an offer on this bargain in Jeffreys, but our house must be sold for at least so much that we can still have something left in the bank Oh, and dont forget the classic we put it on the market for one hundred and fifty thousand more than what we know is realistic, therefore we will be able to negotiate! And so we can go on for the rest of the day.
After the first few weeks most active buyers have now seen Peters R1.3 mil house. Some agents may try hard to push it, but over-advertising does not prevent an overpriced house from getting stale on the market. Other agents will most probably reason that since Peter have refused fair offers, even for only R50 000 below his price, he is not serious to sell, and that he, Mr. Agent, is wasting his own advertising budget, his time, and that of prospective buyers.
At this stage Peter will probably decide to either withdraw the house from the market, or rather reduce the price week after week. Still without receiving any acceptable offers. However the property has by now already achieved stale status, and buyers will start asking questions: Did I miss some defects in the property, exactly how desperate are they? The price is coming down week after week, lets rather wait till it is a steal The offers will come in even lower as buyers now want to build a safety margin into their offer. At the end of the day the Redgards house will most probably be sold for far below its true market value. Yes, Peter became desperate, irritated and even started to believe that there is indeed something wrong with his house! The buyer? Some investor who is willing to take the risk as for the price he pays, he can afford to have possible defects repaired. The Regards? Selling below market value can cause them to miss out on their Jeffreys property, or they will have to move to a less expensive neighborhood that originally planned for.
Can you avoid this pitfall?
Everyones home, big or small, is his castle, but in determining the price one should be realistic. Even upgrading a property does not always guarantee recouping of your investment in the short run as you might have overspent. Try to ignore the fact that it is your own property. Allow an experienced, reputable estate agent with integrity to lead you in pricing your castle, or get a professional valuator to do this for you. You must however be prepared to pay a valuator around R800 towards fees. Integrity is the foundation of all successful real estate deals. Do your homework and qualify your agent. As a matter of fact, agents building successful businesses have one thing in common: They work cleverly, creating a network of references, and it is from these references that prospective clients can qualify their agent and judge his ability to price correctly.
If Peter have rather consulted such a professional person, it would have been clear to him that the first few weeks is the most crucial period in any marketing campaign. Buyers are always on the lookout for fresh properties that just came onto the market. Most serious buyers will therefore consider your property within the first three to four weeks. (This differs from activity in the market, price range, and area) Thereafter overpriced properties will find themselves in their own little niche: no competition between buyers, because there are simply not enough of them! Dont forget that todays buyers are much more price conscious than earlier. For most of them it is probably the biggest single investment that they will make in their lifetime. They compare houses, and your overpriced property may even help selling the less attractive but correctly priced house down street! Never underestimate the power of the basic supply and demand forces in the market.
To facilitate a quick sale at maximum profit, appoint a good agent. He must by means of a comparative market analysis determine recent selling prices of similar properties in your region. This information, from your local Deeds Offices, is readily available to him and can be accessed via several property information Internet sites at a small fee. It is also advisable to check the status of properties in your area that have been on the market recently. Is it still on the market, why and at what price? Some agencies, being members of successful groups, can assist you in valuation via a so-called open/valuation hour That is an excellent opportunity, dont miss out on it! Discuss the results with your agent and decide on a reasonable price. A Sole Mandate is advisable as it can offer several advantages such as controlled access and a properly managed marketing plan. An agent will also spend much more time and money on a sole mandate. Be wary however not to sign a sole mandate only because you are promised an unrealistic selling price.
You must most definitely consider if your property is ready to be marketed, it has a direct influence on pricing. Spending a few bucks to clean carpets, repair a leaking roof and a little paint can do wonders. Neat kitchens and bathrooms can surely sell a house, not to mention a garden with beautiful flowers! If not, it makes for a bargaining opportunity. For this reason it might be better to put it on the market early in spring.
Bottom line is, price correctly, you can always refuse unacceptable offers.
Proper preparation of a show house is crucial. More of that next time.
Agencies in the Propspec group in Bloemfontein have all made valuable contributions in the writing of this article.
Article by: www.propspec.co.za