Virtually every person who decides to sell their property believes that the property is worth much more than what it actually is.
The reason for this is usually because the neighbouring properties have sold for a certain amount or Estate Agents have convinced the owner that the property is worth the inflated amount.
Unfortunately some unscrupulous Estate Agents attempt to win favour with the owner or to obtain a Sole Mandate by inflating the price of the property. Many Estate Agents have a strategy to overprice so that they can get a Sole mandate. This means that no other Estate Agent may market the property until the Sole mandate has expired.
The problem with overpricing a property is that it will not sell at the exaggerated price no matter how much advertising or marketing money is thrown at it. The positive impact that a new property on the market could have had will be lost if overpriced. No Purchaser will pay more than what a property is worth. In fact, the only person who really decides what the Property is worth is the eventual purchaser. The price that the owner wants is a wish list and the price that the Estate Agent provides is his or her best guestimate based on all the relevant facts and knowledge.
An overpriced property may remain on the market for an extended number of months. This means that the Seller will have to continue to service the bond, pay rates and taxes, pay insurance and water and lights. The potential purchasers are all comparing Properties by going to show houses and by visiting various websites. They know exactly when a Property is overpriced, and not one of them will purchase the property. Overpricing attracts the wrong buyers because the Property is overpriced. For example, if the Property is only worth R2m, and it is being marketed at R2.5m, then the R2m buyers will not be showing an interest as they don’t know that the Property is overpriced, and the R2.5m buyers won’t pay the exaggerated price either.
Estate Agents earn commission and know full well that the overpriced property will not sell. They use these Properties as a springboard to sell their correctly priced properties. Advertising is also very expensive so it may not be in the Estate Agents interest to advertise an overpriced Property. The longer a property is marketed for, the more the chance that both potential purchasers and Estate Agents will loose interest in it or take a chance and make a low offer. Purchasers may eventually think that the property has some serious flaws. In fact, many overpriced Properties eventually sell at a value far below the market value. The property market at the moment is flooded with Properties for sale so if the seller wants to sell quickly then the only strategy is to market the Property at the correct price.
The markets can also play havoc with overpriced properties as the interest rates can increase leading to less potential buyers or the Banks can make their lending criteria very stringent as we have seen over the last few months.
In summary, if you wish to sell your property quickly and at a fair price, then ensure that your price is right from day one.