Sitting with a home that simply won't sell because it's overpriced can cause a lot of frustration. But how do you market your home for what it is really worth? We have some pointers for you.
As Katherine Paine from the University of Manchester once said, “The moment you make a mistake in pricing, you're eating into your reputation or your profits.” She may not have been discussing real estate pricing, but she nevertheless hit the nail on the head with this little gem.
So how, you may ask, can overpricing a home affect your property’s reputation or your profits?
Homes that languish on the market for an extended period of time generally earn a bad rep mainly because buyers think there is something horribly wrong with the property. And more often than not, when they eventually do sell, it's for a lower price than it should have been listed at in the first place.
Much has been written about the importance of pricing your home to sell but for some reason, certain sellers believe that they will somehow be able to beat the system and offload their property at an unrealistic price. Unfortunately, this seldom happens. So how exactly do you price your home to sell and why on earth should you listen to someone else's opinion?
Grant Gavin from RE/MAX Panache says there are five factors that need to be considered when putting a home on the market. The location, accommodation, condition, price and how motivated the seller is will all help to determine how much the property will eventually fetch.
“Of the five factors mentioned, there are two that the seller can actually influence (without spending a fortune on alterations). These are the condition of the property and the price. However, the most powerful factor is the motivation for selling.
“While most people believe that estate agents are responsible for setting the price of a home, this is not entirely true. Estate agents are professionals and as such will provide professional advice to a vendor on what price could realistically be achieved. The agent will arrive at this sum by taking into account comparable homes for sale in the area, recently sold properties, and the current market conditions. However, it is ultimately the home owner who will make the final decision on what price tag they want to attach to their home.”
Unfortunately, Gavin notes, for those with little motivation to sell, emotion can quite often overcome logic and professional opinions based on fact and statistics. Sadly, the effect of this is that if priced incorrectly, the home owner puts themselves at risk of not achieving their primary objective - getting the best possible price in the shortest possible time.
People who are motivated to sell because they absolutely have to move generally pay more attention to what the market is telling them. This, coupled with hard statistics, will enable them to price the home correctly.
“Most real estate agents will be able to present you with the statistics to prove that the longer a property remains on the market, the lower the eventual selling price will be. There is a good reason for this.
“One of the most important groups of people in this whole process - and one which is probably just as well informed as estate agents when it comes to recognising market value - is the pool of buyers currently looking for a home,” says Gavin.
“With the information available on the Internet, buyers have access to property listings on company websites, market statistics and data from the major property portals. They also consistently view the properties on the market during their house hunting process. Therefore, when a seller lists their home at a price that represents a large premium versus real market value, buyers will tend to avoid that property.”
He urges sellers to place themselves in the buyer’s shoes when they assess their own marketing strategy and to ask questions like: if you were a buyer and found three similar properties in the same suburb, in the same condition, all offering the same accommodation, but one would cost you R300 000 more than the others, which one would you choose?
So what is the best approach to setting the right price for your home, one that will attract multiple buyers and get them to make good offers?
Gavin recommends the following:
- Get professional advice. Find the best estate agent in your area. The top producing estate agents in any area understand their markets, and more importantly, they know how to compare your home to others currently for sale.
- Don’t be tempted to add on 20% for “negotiation”. You will be surprised at how setting the right price can actually stimulate demand and competition amongst buyers. If you set the price correctly, you will see the activity in terms of the number of viewings in the first few weeks. This is because the best buyers are actively looking around the market already.
- Don’t be concerned about an immediate result. If you were diligent in following steps one and two, then trust the advice you have been given. Most home owners worry that if they get an offer too quickly, it must mean that their price was too low. This is not always the case, and is more likely to mean that he was probably spot-on with his pricing.