Property Price War? Or Just General Hysteria?

Private Property South Africa
Lea Jacobs

According to a report by John Loos, Household and Property Sector Strategist at FNB, some 88% of sellers are now having to lower their prices in order to appease buyers and get their properties sold. While this figure seems incredibly high, it may be an idea to remember that it has become pretty standard for a buyer to negotiate a “better” price during a slower market. Although it is virtually impossible to gauge whether or not sellers are actually losing out, it can be said with a fair amount of confidence that most are still making a profit on the sale.

The seller of course has every right to reject an offer regardless of the amount and indeed, during boom times, the situation often develops into something akin to an auction. During these periods, buyers who desperately want to purchase a particular property actively vie for the ownership and, if another buyer puts in a higher offer, they will up the ante and make a counter offer. Sellers generally emerge as the winners in these tussles and in many cases, eventually sell their homes for more than the original asking price.

It needs to be remembered however that boom periods are the exception rather than the rule and generally speaking, the buyer tends to have the upper hand if a seller needs to sell the home fairly quickly.

Given the above, should sellers consider building the “loss” into the asking price? Experts warn all the time of the dangers of overpricing and quite frankly, they have a very valid point. If buyers deem a property too expensive when compared to others on the market, they simply won't bother to view it, never mind take the trouble to put in an offer. Remember, buyers are not mind-readers and, while some may take a chance that the seller will consider a lower offer, many will simply look at properties that are advertised as being within their price range.

Property is an excellent long-term investment and given that the market is returning to some level of normality, sellers are generally not going to lose money when they sell – provided that they didn't pay too much for the home in the first place. Sadly, many investors bought right at the end of the boom and, to be frank, probably paid far too much for the home. Unfortunately, in these situations, sellers are either going to have to accept a market-related offer or hang onto their properties until the market plays catch-up if they want to sell for a profit.

Worryingly, it seems that estate agents are once again being held responsible for things that are completely out of their control. A reader recently commented that agents should be blamed for the fact that sellers are being forced to accept lower offers as, in his opinion, agents are the ones overvaluing properties. While this makes a welcome change from hearing that agents undervalue property in order to make a quick sale and rake in the commission, for the best part this is unlikely to be true. An agent cannot force a seller to market a home at a specific price. However, they can – and should – guide them by providing concrete evidence via a comparative market analysis showing how they arrived at their recommended sales price. Whether or not a seller chooses to accept this recommendation is purely a personal choice.

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