South Africa’s residential property market is showing signs of improvement, as evidenced by increased enquiries from prospective buyers, improved show house attendance and stock shortages in a growing number of areas.
That’s the word from Richard Gray, CEO of Harcourts Real Estate SA, following the release of FNB’s April 2013 House Price Index, which reports “mildly positive growth” during the first quarter of 2013, with the likelihood of further value gains in the second quarter.
“As a group, we’re seeing a widespread uptick in terms of buyer interest. From being in the doldrums for the last few years, the market appears to be on the road to recovery, with house price growth in popular suburbs on track to exceed inflation in real terms for the first time since 2008,” he says.
However, he warns, the positive spinoffs of an improving market are likely to be experienced by only 10 percent of today’s sellers. “During the first quarter of 2013, FNB released statistics showing that 89 percent of properties sold for an average of 10 percent less than their original listing price. Furthermore, the average length of time properties spent on the market before being sold or withdrawn was 17 weeks and two days, and while there is no hard and fast rule about how long a home should take to sell, four months is excessive by any real estate professional’s standards.”
Given that the economy is stabilising and on the back of rising residential demand, Gray says the failure of such a large percentage of listings to achieve their asking prices or to sell within a reasonable time frame can only be ascribed to human error. “Feedback from our member offices as well as from within the industry at large is that sellers are making some serious mistakes which are chasing otherwise-willing and able buyers away.”
At the top of the list of mistakes is incorrect pricing, which Gray says is often accompanied by an instruction to the listing agent to put the property on the market at an inflated price and “see what happens”. “Sadly, nothing good usually happens,” he says. “Active buyers are watching the internet and the ‘papers for new releases and are quick to make contact with the listing agent to set up appointments to view when a new property comes on to the market. The most traffic passes through a new listing within the first two weeks, after which it tapers off dramatically.”
“Harsh as it sounds,” he points out, “the value of a property is not determined by what the seller paid for it, how much they need for their next purchase, or what they owe on the property. Buyers are extremely well educated about property values so the only person likely to be fooled by over-pricing is the seller who is living with unrealistic hopes and expectations.”
In the interests of establishing an objective and realistic selling price, Gray recommends the use of a report called a comparative market analysis (CMA). “When done by a professional estate agent, the CMA will contain a wealth of important data pertinent to the seller’s area, including properties currently for sale, sold properties and withdrawn listings comparable with their own home. It will also contain analytical information such as market trends and house price growth, highest, lowest and average selling prices as well as an evaluation of their property.”
The section containing properties currently for sale is only important from one perspective, he continues. “Sellers mustn’t be tempted to emulate the pricing here, since these homes haven’t sold and it may well be that their pricing is unrealistic and unachievable. What is relevant is that these properties will be their competition when their own home goes on the market, and depending on what their home offers and the asking price, these listings could lure buyers away from them or chase buyers into their arms.”
The data contained in the “sold” section, which comes from the South African Registrar of Deeds or Deeds Office, reflects recent sales in the area. It’s here, among the facts, that sellers are most likely to find a realistic, achievable selling price, says Gray.
Another common seller mistake is choosing an estate agent on the basis of friendship or because they gave the highest valuation. “The best agent for the job is someone who is qualified, experienced in the intricacies of the sales process, who knows the area well and who has a successful track record. Also important is that the agent has access to a wide marketing platform that includes the top online property sites and social media,” he avers. “With more than 80 percent of South African buyers shopping for homes on the internet today, it’s critical that homes are well presented online, with a host of quality interior and exterior photos. It’s going to cost about the same for a pro as a mediocre or even bad agent, so sellers need to stand firm on their right to work with the best in the industry.”
Sellers who don’t grant easy viewing or show house access are also in for disappointment. “No matter how good an agent is, they won’t be able to sell a property home if it’s seldom available to view,” cautions Gray. “Selling is hugely inconvenient, not least of all because one needs to be show house ready and available for viewing appointments at the drop of a hat. Serious sellers accept this and if they can’t get away from work to open up, they will entrust keys to the agent, a family member or friend. The same is true of show houses. No one likes them but they’re often more effective in attracting qualified buyers than newspaper adverts. The bottom line is that the more accessible a property is to buyers, the sooner it is likely to sell and the better the price it’s likely to achieve.”
Other self-limiting actions, according to Gray, include refusing to allow for sale boards outside the property, rejecting lower-than-asking price offers outright instead of counter-signing them, not responding quickly to offers and thereby allowing buyers to go cold, and listing with multiple agents, thinking that this will result in maximum exposure for the property. “When a property is uploaded on to an agent’s website, it is exposed to all the buyers. Sellers are often afraid of sole mandates, thinking that the involvement of multiple agents will expedite the sale of their property, yet the reverse is usually true because no one ends up taking responsibility for the marketing. Open mandates tend to be used to sell other properties, and what’s more, they can lead to double commission claims. A sole mandate in the hands of a professional really is the best way to sell in this day and age – and the insertion of a performance rider in the contract will allow the seller to terminate the mandate should the agent fail to deliver on his commitment,” he advises.