Reams have been written about the importance of correctly pricing a home, but unfortunately there are still thousands of overpriced homes on the market.
Although there are countless reasons why a property won't sell, most of the time, it’s due to the fact that buyers are not willing to spend any more than they absolutely have to on a property and disregard what they believe are overpriced homes.
It is understandable that owners may be at a loss as to how much the home is worth and will take the advice from estate agents, particularly if the agent who is intent on securing a sole mandate values the home way in excess of what the owner thought it was worth. On the other hand, there are sellers who refuse to listen to an estate agents’ advice and insist that the home be marketed way above its value.
Overpricing is unprofessional
According to Geoff Strobel, owner of the RealNet Southern Suburbs franchise in Cape Town, overpricing a property, ostensibly to “make the seller happy” – but actually also to help secure a sole mandate to market the property – is an all too common and unprofessional practice. Sadly, the practice often backfires on the agents who engage in it, as well as the clients who push them to do it.
"We all agree that pricing a home is not an exact science, but a correctly priced home in our area should sell within three weeks of being listed, in the current market. Overpriced property, on the other hand, will languish in the market and lose appeal, giving the owner little choice but to lower his asking price anyway in order to have a chance of achieving a sale. More often than not, the selling price that is finally achieved is then actually lower than the correct market value, simply because the number of interested buyers has dwindled."
He raises a valid point when he notes that this could represent a serious financial blow to the seller, and those who have once burnt their fingers in this way are – unsurprisingly – usually loathe to ever again award a sole mandate. “Indeed, they will often swing the other way and open the mandate as wide as possible, to their own detriment as well as that of all the agents involved, as an open mandate is often a licence to do very little active marketing.”
The blame game
The blame for this situation, Stroebel says, lies squarely on the shoulders of agents who should know better than to encourage sellers to award a sole mandate based on an inflated asking price.
He says that, instead of educating sellers by correctly valuing the property based upon their experience, the current market conditions and the comparative sales in the area, many agents allow themselves to be bullied into marketing the property at the price expected by their client.To make matters worse, the seller then often instructs the agent to add their commission on top of the required minimum price.
However, he says, one of the reasons that agents may be desperate to list the property under a sole mandate banner could be due to the pressure linked to meeting a listing target that only takes accounts of numbers and not pricing. “In fact some agencies don't seem to mind having overpriced stock on their books, as long as it is not in the hands of their competitors, says Stroebel. “Their opinion is that it will eventually sell, and if they can keep the listing long enough, they will ultimately get whatever commission is payable.”
Comparative mistakes
This, he says, further distorts the market, as new sellers coming into the mix will compare their properties with what is already on offer, and tailor their asking prices accordingly, never taking into account that those same, over-priced homes have been sitting in the market unsold for months on end, he says.
Those who want to sell their homes quickly, with the least possible fuss, should consider getting a solid idea of what there property is worth by asking more than one agent to value their home before putting it on the market. Any agent worth his salt will be able to back up his findings with solid evidence indicating what similar homes have sold in the area and at what price. The agent who promises the earth in terms of price, must be able to substantiate this by providing valid data. Those who can't put their money where their mouths are should be treated with a fair amount of suspicion, as it's unlikely that the home will never sell for a figure that he has literally sucked out of his thumb in an effort to get the property on his books.