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Setting the right price

One of the most detrimental mistakes that so many sellers make when putting their home on the market is overpricing the property, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

He notes that often sellers set a higher price for their property then what they want to get out, with the hope that if a buyer offers a lower price, they are still able to negotiate close to the original price they wanted. “However,” says Goslett, “if the property is overpriced, many buyers won’t even take the time to view it and would rather look at other properties that are priced at what they deem to be reasonable market value. All over estimated prices will do is make properties that are priced correctly look like a bargain buy.”

For a large majority of sellers, setting a price on their home is based on more than just its market value. “Homeowners who have stayed in their house for some time may have put a lot of work and care into making it a home. This is often why sellers see their home has having more value than other properties in their area, however, buyers won’t have the same perception of the property,” says Goslett.

According to Goslett, while buyers take into consideration many factors when looking for a property, such as its location or features, a property that is priced correctly is more likely to appeal to a wider range of buyers and be sold within the shortest possible time. When a buyer is comparing properties that are in a similar area and offer similar features, price becomes the number one factor that will influence their decision making process.

Goslett says that with financial institutions slightly relaxing their lending criteria and more buyers entering the market, sellers that over price their homes are taking themselves out of the game and missing the opportunity of finding a buyer quickly. Houses that sit on the market for long periods of time generally lose their appeal and sellers are eventually forced to lower their prices anyway. In many cases sellers are finally selling their homes for a lot less than what they would have received if the home was priced correctly from the beginning.

Statically, if a property is priced correctly it will be sold within the first four weeks of being on the market and generally it will sell at the asking price. Recent research has found that homes which remained on the market for five to 12 weeks sold for 3% less the asking price, 13 to 24 weeks for 6% less and houses that were on the market for 24 weeks or more sold for more than 10% less.

So how does a seller know whether their property is priced correctly?  “If a seller is using an estate agent to sell their home, they should ask the estate agent to complete a comparative market analysis (CMA), which will give them an accurate indication of what other homes are selling for in their particular area. Factors that should be included in a CMA would include the average price per square metre in the area, recent sale prices of similar homes and comparative prices of other properties that are still on the market. This information will help establish a reasonable price bracket for the property,” says Goslett.

Once an estate agent has the correct price bracket for the home, they will then determine what features or unique qualities could set the property apart from others in the area to give a more accurate gauge of the home’s value.

“Unfortunately for many sellers, the market conditions will have the last say in the estimated value of the home. Property prices have seen a drop from the boom era and sellers will need to adjust their thinking to relate to the current market.  Buyers are spoilt for choice when it comes to well-priced investment opportunities, so sellers will need to ensure that their property is priced accordingly or run the risk of watching the market from the sidelines,” Goslett concludes.


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