HOW DO YOU PRICE A HOME CORRECTLY – TO SELL?
By Gaye de Villiers
Wednesday 5th of April 2023
With fair market value a priority for today’s consumers, for homeowners wishing to sell or rent out their properties it is critical that the home is pitched at an accurate, market-related price that will enable it to compete with other comparable properties for sale or rent in the area.
This is particularly important in the current market, which is becoming more favourable to buyers. By its very nature cyclical and consumer-driven, the property market reacts as the balance between demand and supply shifts, so pricing your home right requires expert advice.
Today’s buyers across all price sectors are extremely savvy and research the market thoroughly before committing to a purchase decision, so it’s imperative that a property is not brought to market at an unrealistic price. If you don’t capture the market within approximately the first two weeks, then it’s most likely you’ve lost those prospective buyers.
Bear in mind, buyers – and particularly first-time millennial purchasers, are watching market trends and prices achieved to ensure they make informed, intelligent offers.
They tend to have an excellent understanding of the market as they look at stock listed by different agencies. If a seller is asking way over market price, he/she will either not attract the buyers to the house or will elicit an offer way below asking price. To ascertain if the market is dropping, the difference between a well-considered agent valuation and the actual price achieved for a property should be considered, and not the difference between a seller’s wish price and the selling price – as the wish price was not realistic.
It’s a misconception among some sellers, that a property should be pegged at a considerably higher price than its market value, to allow for any downward negotiation. An inflated price might result in multiple price reductions, which ultimately could see the home sitting on the market for much longer. And if you are making some improvements before selling, installing a pool cover which costs R80 000 is not going to add the same value as spending that sum on a new bathroom. Which doesn’t mean to say you can just add up the cost of all improvements and inflate the asking price by the same amount.
The fact is overpriced properties stay on the market for longer and normally result in achieving a lower price than if they went to market with a more realistic price. This is because buyers look out for price reductions and then see this as an opportunity for a bargain, which is detrimental to achieving the best market-related price.
Markets are by their very nature, dynamic, so in the current somewhat slower-paced market – which is experiencing differing levels of activity in different nodes and areas – and indeed in any market, the seller needs to be realistic in pricing in order to attract genuine buyers.
Set your price in the context of prices achieved for similar homes sold in the area. Ask your agent for a comparative market analysis. Some agents try to lock sellers into mandates by overpricing, only to be let down when no buyers visit or a low offer comes in.
The last thing you want is for your property to sit on the market for a lengthy period and then become ‘stale’, as buyers know when a home is over-priced or remaining unsold.
Buyers are astute and informed because they do their homework. They compare properties to see what else is for sale and how the condition, location and price compares. If it’s well-priced they will offer close to the asking price and if the area is very much in demand a buyer may even offer more than the asking price. Similarly, if it’s over-priced the buyer will offer much less.
Generally, we are currently experiencing a shifting market where buyers are starting to resist prices. With the rising cost of living, including increasing electricity and water costs, people have less disposable income and are generally more price-conscious. This makes it all the more imperative that home owners who want to sell their properties ensure these are priced correctly.
Sellers also are advised to take note of the number of properties on the market that will be competing with their property once they go to market. The more properties there are on the market the more your home has to stand out from the rest and offer good value for money for buyers. Also take note of any positive development occurring in your area which could advantageously influence the sale of your property.
Pricing, now more than anytime over the past decade, is critical to success. Not taking cognisance of market trends right now will result in the property remaining on the market for longer and achieving a much lower selling price after the market has rejected the initial listing price. Remember that other properties listed at the time will provide alternatives to buyers viewing your property. If your property is not competitively priced, it will be rejected by the market and point the buyers in the direction of the other properties.
A well experienced agent who has worked in the market through various selling cycles will invariably be better placed to advise the seller on critical issues such as listing price and marketing strategy. The seller has one opportunity to correctly list and position the property in the market, and an ill-advised strategy will cost the seller time and money.
Comparable recent sales are the only way of determining the listing price and in this dynamically changing market this strategy may not be entirely accurate. There is no substitute for an entrenched agent in touch with the market and up to the minute selling trends. The top-end of the market is more difficult to price as it is complicated by the rarity value or uniqueness of the property, and the amenities including the views. Very often unique top-end properties don’t offer similar comparable factors and this is where an experienced top-end agent can offer insight as to pricing and marketing strategy. Invariably, with top-end listings, properties may take much longer to find the right buyer as they are not as tradeable as other sectors of the market.
A valid point is that as the property market is consumer driven, the replacement or ‘production’ cost is irrelevant to the buyer – it is simply a question of supply versus demand.
Further advice for sellers from Pam Golding Properties:
Factors which are less or not relevant when pricing your home include: what you spent on it and how much money you need to be able to purchase your next property.
Another factor to consider when pricing your home is that property search portals require the user to enter a price range to narrow down their search options. If the asking price is R755 000 and the buyer’s price range is from R700 000 to R750 000, the home will be missed. By listing the property at R750 000 it will stand a far greater chance of capturing potential buyers in the ranges above and below the asking price.
Obtain expert advice from a professional and experienced agency operating in the area and then take the agent’s market assessment into account when pricing your property for sale, be flexible on viewings and allow show days, and ensure your home is always neat and presentable.
Remember that having a dedicated agent market your home achieves much better results than having it over-exposed and available to all. Not only is this a security risk, it can also lead to double commission claims and buyers thinking the seller is desperate to sell – which could lead to lower offers. Having one agent control the listing, position the property in the market and work a strategy to maximise the selling price is the best way to sell your property.
Presentation is critical and the home should allow the potential buyer to feel that they could just move in. Remove all clutter, tidy up, freshen up paint work, deal with all the overdue maintenance, check that doors and cupboards open and close easily and replace door and cupboard handles for a more modern look.
Also bear these factors in mind:
- What you paid for your home has nothing to do with its present value. The value of the property should increase roughly by the suburb average growth rate per annum. So if you bought it 10 years ago and average growth for the suburb has been 4% per annum over the period, then this is one yardstick measure of what the property should be valued today. However, if you overspent in an area and want to sell again in a short period of time it doesn’t matter what you paid for it, the current market will determine the current value.
- The price you would like to achieve for your home doesn’t dictate the asking price. Again, the current market determines the value of your property. If your property isn’t selling in the current market, it means the market is rejecting the asking price.
- The value other agents put on your property is not always accurate. Ask the agent to substantiate their value assessment. Experienced and professional agents will normally result in the same or a very similar valuation. The market will determine the selling price, broadly speaking – based on location, supply and demand. Some agents may over-value a home just to get the mandate and then months down the line the house sells for far less than it should, simply because it was not correctly priced from the start. No matter what has been spent on finishes and renovations, the home in its current state needs to be compared with what similar homes in similar condition have been sold in the last year or two – price adjusted for inflation.
- What a valuator says your home is worth doesn’t determine the price in the market. Bank valuators look at area statistics they source from the Deeds Office, but they have not seen the condition or finishes of those houses and the reasons why a house may have even sold for less than the current market value.
- When taking into account the prices of homes sold in your area, base your assessment on the actual price achieved and not the listing price. As properties for sale have not yet sold, the asking prices may be too high, and some may have been sitting on the market for some time.
Posted by Niki Jackson