Tempting as it is to believe high estimates of the market value of your home, resist putting it on the market at an unrealistically high asking price.
Buyers do their homework, so an unrealistic price may result in very low offers, or worse, a total lack of buyer interest.
Extremism breeds extremism and, if the asking price is unrealistically too high, buyers will feel they have the right to make offers as absurdly low as it is high. This is especially true of a buyers’ market.
At Jawitz Properties, we believe that one of the critical factors in maximising the final selling price of your home (the other is the Exclusive Authority to Sell addressed elsewhere in this publication) is the relationship between marketing your home; generating maximum buyer interest and the time the property stays on the market !
We call it – the window of maximum impact and opportunity!
It is when your home is new to the market and where the marketing should generate maximum buyer interest and activity.
If your home is priced correctly to the “Current Market”, interest will be high and the market will respond with genuine and competitive offers.
If overpriced relative to the “Current Market”, you run the risk of eliminating potential genuine buyers who may have been interested in your home.
Homes that are overpriced and do not sell become the basis for comparison for competing homes that offer better value and that will sell in a shorter time period. This rule applies at almost any price level.
There is no such thing as a property that cannot sell – there are only sellers (and sometimes agents), who “are in denial” and will not accept what the market is prepared to pay.
The longer your home stays on the market, the greater the risk of receiving lower offers and eventually selling below current market value or not selling at all!
With a realistic and pro-active pricing plan based on understanding the market feedback, this scenario is completely avoidable.
A difficult task:
It may not be easy for you, the seller, to accurately and objectively assess the property’s true market value.
While a reputable agent will do this, you have to be aware that some less ethical agents may “lure” you with inflated estimates of the value for your home in order to secure a mandate.
Personal research into prices for similar homes in the area is the best way to safeguard against this.
Once an agent has you committed on the strength of a high valuation, you may find you have to drop the asking price – even before the property is advertised. This is a clear indication of an unrealistic price.
If the agent has priced the property realistically, he will be reluctant to have you accept a lower offer, and will take time and effort to convince a buyer of its true value relative to comparable properties.
It is only through this effort by the agent that a buyer making a low offer will be open to upward negotiation.
In reality, actual cases show sharp drops from asking price to selling price where the former has been too high. What does this say to buyers?
For buyers, it creates a false impression that the market is dropping.
Obviously when selling, you want the highest possible price. However, on the other side of the coin, no buyer will pay an unrealistic price for your property.
Market value is largely determined by the prices other sellers accept and those prices that cannot be achieved.
While the seller is the final arbiter of what he is prepared to accept or reject, it is the buyer, not you or your estate agent, who determines the real market value of your home.
Ideally no property should ever be priced more than 10% to 20% above its final selling price.
Determine comparative market value; take into consideration the relative attractions of your home, then set the asking price within this 10% to 20% parameter.
The reason why we advocate this margin is it’s important, notwithstanding everything that’s been said, that we first see what the market will pay before we even begin to discuss what it won’t pay.
If buyers can relate to this amount you stand the best chance of getting your price.
Irrespective of the market, buyers will always respond positively within 5 – 10% of the price if they see value.
If the market doesn’t respond positively, please understand the buyers are not rejecting your home; it’s the price they are rejecting.
To make sure that the agent is giving you an estimate of real market value, remember three things :
- The replacement cost of a property has nothing to do with its market value.
- Market value is determined by what the buyer is willing to pay.
- Buyers determine market value by comparative assessments and by comparing the accommodation, features and prices of various properties for sale and already sold.