Are homeowners’ expectations too high when it comes to selling their homes, or are agents overpricing in order to get the listing and, hopefully, a higher commission?
One of the stranger personality traits of some estate agents is the unfortunate habit of inflating the true value of a property. Think about it. You’re unlikely to find a second-hand car salesman offering to raise the price just for the privilege of having your vehicle on his showroom floor. So why do agents promise the earth when listing a property, and why do sellers listen to their advice? The fact that South Africa is in the midst of the worst recession since the 1929 crash has had a massive impact on property values throughout the country. Prices have dropped and, although buyers still appear to be thin on the ground, there has been a slight improvement in the market since July last year. Although interest rates are currently at a 36-year low, according to Dr Andrew Golding from Pam Golding Properties, the biggest stumbling blocks for buyers are affordability and the availability of finance. A survey conducted with the aid of figures from the South African Property Transfer Guide (SAPTG) has highlighted an interesting trend. In most cases, the prices advertised in the Cape by a variety of agents on a well-known property website are way above the average price actually achieved in the area. While not an exact science, the exercise indicates that sellers and/or agents remain overly optimistic about property prices in general. Some areas in the Western Cape seem to have weathered the economic storm better than others.
According to SAPTG’s figures, the cheapest freehold property sold in Fresnaye, an affluent suburb on the Atlantic Seaboard, went for R2,2 million. The highest price paid was a staggering R62,5 million. A total of 26 freestanding properties were sold from July to December 2009. All in all, 12 sectional title properties sold during the same period. Prices for these units ranged from R995 000 to R19 million. Interestingly enough, properties advertised by various agents on the property website start at R2,995 million - a cool R2 million above the cheapest property that actually sold. Observatory, a middle-class suburb, saw 43 freestanding properties and 12 sectional title units changing hands. The most expensive freehold property sold for R2.3 million and the cheapest went for R530, 000. The lowest price paid for a sectional title unit was R475 000 and the highest price achieved was R925 000. Prices advertised on a leading property site start at R390, 000 for a one-bedroom flat while a three-bedroom loft apartment on the market for R2,5 million is the most expensive. Freestanding homes are advertised from R695,000 for a two-bedroom home, while a 10-bedroom home is on the market for R2 million.
Edgemead, yet another middle-class area, proved to be a more popular area with freehold property buyers, and 62 homes in this area were sold last year. The highest price paid was R1,8 million and the lowest R445 000. Only three sectional title units were sold in the same period and prices ranged from R499 000 to R705 000. The cheapest unit advertised is selling for R740 000 unit while the most expensive is priced at R750 000. These are the only two sectional title properties listed on the website for this area. Houses, however, are much more prolific and range in price from R925 000 for a one-bedroom home to R2,195 million for a three-bedroom property. It is fairly evident that, for the best part, something somewhere is going wrong. Should agents be forced to put their money where their mouths are and, as in the USA and other countries, be fined for repeatedly over pricing homes? Indeed, clause 3.8 of the Estate Agents Code of Conduct expressly prohibits agents from knowingly or negligently overvaluing property in order to gain a mandate. Now, all we need is someone to enforce it. Article courtesy of and is taken from their May/June 2010 Issue.