One of the most critical skills in a property practitioner’s basket is customer service. This is not an easy landscape to navigate in the current market, especially when it comes to managing buyer’s and seller’s property value expectations.
Research makes it clear that the worst thing a property practitioner can do when there is a ridiculous number on the table, is to tell the buyer or the seller that they are wrong, even if they most likely are. Being that honest means the potential exists to offend someone. Also, market value in a fluctuating environment does not always have to be based on what a buyer is willing to pay … rather, it is about how the property practitioner can encourage someone to pay more for the property, yet still negotiate a good deal for both parties.
Property practitioners best tips on how to manage expectations
Q: What advice do you give a buyer when you are absolutely certain the seller will not accept an offer under a certain amount?
Michael Bester, Specialist Agent Atlantic Seaboard: Tyson Properties: I suggest that they put their best foot forward and make their best offer upfront. A “low ball” offer may put the seller on the offensive and disrupt their emotional demeanour. This may also cause them to ignore the offer, turn it down, or make a counter-offer at an unreasonable price. Buyers can avoid the back-and-forth and secure the property at a fair price by following the advice of the agent by submitting an offer that evokes the interest of the seller, even if it is below the asking price.
Maryna van der Merwe at RealNet Polokwane: All offers have to be presented so I would assist the buyer/s to make their offer and let the seller/s decide on the acceptance.
Q: A buyer is prepared to make, what may be considered, an 'unreasonable' offer. What do you consider as 'unreasonable'?
Jan van der Merwe, principal at RealNet Centurion Core Properties: It depends on the asking price. If the asking price is correct after price counselling, my opinion is 1-2% under asking. However, if the asking price is too high, the percentage will obviously differ and could be between 5-10% depending on price segment.
Francois du Toit: Director Tyson Properties, Johannesburg: A reasonable offer in the Johannesburg area would be around 10% below asking price, however this may differ somewhat between the different price ranges and segments of the market. The other main factor to consider is whether the property is realistically priced for the market at that point in time. The supply and demand factor always comes into play. Buyers are educated and information is available everywhere, so sellers do not have the benefit of testing the market at a higher price with the hope that they might get lucky. I do believe that in the higher end of the market (R5-million and above) it might be more than 10%, however we cannot eliminate the conditions of the offer as sellers will always look at the risk factor before making a decision.
Q: When you have two buyers, both prepared to make an offer under the asking price, how do you guide them and avoid a bidding war … and is it ethical to advise competing buyers of the other’s offer?
Lize van Byelvelt, Real Estate Agent, Leadhome: I will always advise both buyers that other offers are on the table, but not the amounts. If either really want the house I will guide them to up their offer. Sometimes it isn’t always about the best offer anyway because a lot may depend on who secures the finance faster.
Yunus Randeree, Specialist Agent Tyson Properties - Musgrave, Morningside, Essenwood, Durban North: I personally do not like a bidding war or horse-trading. Instead, I encourage the first interested buyer to make their best offer. If the first interested party informs me that they are withdrawing or if the offer is rejected, I will work with the second interested party. It is definitely not ethical or professional to discuss the competing offer/s with the buyers.
Q: Does it happen that a buyer influences the seller's decision on the price offered, such as emotional appeals, or plans to make extensive renovations to their much-loved home?
Francois du Toit: Director Tyson Properties, Johannesburg: It’s important to be mindful that for most sellers their home is their biggest asset and it is inevitable that there will always be emotional factors when selling their home. Buyers will quite often take advantage of all the improvements that need to be addressed and make a very low offer, hoping to secure the property at the lowest possible price. This can upset the seller and escalate into a power struggle between the two parties, making for a very difficult transaction. An experienced real estate professional is able to broker the transaction and manage both parties expectations and assist them in reaching an agreement.
Q: By how much percentage should buyers be offering above or below the asking price in both a sellers’ market and buyers’ market?
Jan van der Merwe, principal at RealNet Centurion Core Properties: In a sellers’ market, as little as possible, especially if there is more than one interested buyer, but not more than 2.5%. This does, however, depend somewhat on the pricing segment. In a buyers’ market we have to consider that there is always room for negotiation, but this depends on whether the property professional has provided some counselling. In my opinion, perhaps 5-10% depending on the price segment.
Lize van Byelvelt, Real Estate Agent, Leadhome: There is no real percentage figure that can be considered a magic number. Whether a buyers or sellers’ market, all offers should be considered in the sense of how long a buyer intends to keep or live on the property; how much they want to own it; and whether they should up their offer by one or more of a percent to secure the deal … even if that is above asking price. If the property is over-priced - often evidenced by being on the market for a long time - it's not a matter of percentage that counts, but rather what buyers are willing to offer. Generally, I would recommend not dropping more than two percent lower than asking price.
Q: By how many days/months that a home has been on the market, should the seller be encouraged to consider a low offer?
Anne-Marie Scholtz, principal at RealNet Elegance: Depending on the reaction of the market, the seller should reconsider the asking price after two weeks.
Francois du Toit: Director Tyson Properties, Johannesburg: The best time to sell a home is in the first two to three weeks. In the case of homes priced below R3-million, if there is no traction within those two to three weeks (no offers and not a lot of viewings - and the data is available so that we can see how many people have viewed it versus other similar properties), the price needs to be adjusted. For those over R3-million, the price should be reconsidered after four to six weeks.
Michael Bester, Specialist Agent Atlantic Seaboard: Tyson Properties: I believe that the first few weeks are crucial in the marketing and selling process, so getting the price correct from day one is imperative. Over-pricing a property can lead to it becoming stagnant and sitting on the market for months. By the time we have reduced the price and it eventually sells, the seller has lost out. Pricing correctly eliminates the need for price reductions and selling at a price that is below what could have been achieved earlier in the process.
Jan van der Merwe, principal at RealNet Centurion Core Properties: If you do not get a response from the market in seven days you should reconsider the price. The market response does not lie…if you list a correctly priced property, it will show immediately via the market response. However, the seller’s willingness to sell or motivation to sell plays a critical role.
In a nutshell, this is what it takes to manage expectations.
Writer: Kerry Dimmer