Don’t get bitten by holding costs

News > news - 23 May 2011
The average time that a home remains on the market before being sold is now around 4,5 months, but sellers in parts of Pretoria can cut that time significantly by making sure their home is priced right – and save themselves a bundle in holding costs at the same time.
So says Dr Willie van der Merwe, principal of the RealNet Watermeyer franchise, which serves the suburbs of Brumeria, Lydiana, Meyerspark, Murrayfield, Silverton and Val de Grace. He notes that in recent months, the agency has sold 75% of the properties that were listed at the “right price from the start” within 30 days.
“But the rate of sale drops off quite sharply if properties are even a little overpriced. Of the properties we have recently sold for just 4% less than their initial asking price, for example, only 56% were sold within 30 days.”
And the holding costs during the extra weeks and months that an overpriced property remains on the market can add up to quite a large sum of money, he says, which most home sellers could put to much better use.
“According to the latest FNB Property Barometer, 85% of home sellers have to drop their asking price in order to achieve a sale at the moment, and the average reduction is 12%. This translates into about R120 000 on a home initially priced at R1m, and many sellers will feel that is too big a reduction to make.
“However, it is our job as agents to point out to our clients that the chances are good that they will end up making this concession anyway – at least if they are serious sellers – and that if they don’t do it at the outset they are also likely to incur several months worth of holding costs while their overpriced property remains unsold.”
On a R1m property in his areas, says Van der Merwe, the monthly bond repayment is likely to be around R9000, the municipal bill for rates and services around R3000 a month and insurance, maintenance and security costs about another R1000 a month at least.
“So for every month by which he can cut the listing time of this property, the homeowner will be saving around R13 000 – which he could use, for example, to pay a bigger deposit and reduce the monthly bond repayments on his new home, or perhaps just to settle some debts.”
Sellers in his areas, he says, should note that the properties most in demand at the moment are sectional title units priced at between R500 000 and R650 000, and full title homes priced at between R1m and R1,2m. “Anything outside these parameters is selling more slowly, and is less likely to be financed by the banks.”
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