Overpriced real estate leads to failure
BY CAMILIA DU PLOOY
The process of selling a house can be an emotional rollercoaster, one that many people are not prepared for.
What your home means to you, and what you imagine it to be, is not necessarily compliant with what is currently happening in the real estate market within your area. One would have to come to terms with the real world of the industry's current affairs. Nowhere else does this clash become more apparent than in the pricing of your property.
“One should not be too hasty when pricing your holding. With technology and information at your fingertips, you could do a bit of research yourself, looking at what properties sell for in your area and also viewing market statistics on numerous online platforms. However calling your local real estate agent for some advice and a free property evaluation, could save you a tremendous amount of time than trying to fix your mistake later on” warns Craig Hutchison, CEO to Engel & Völkers Southern Africa.
Consequences of overpricing might have you waiting a very long time before you can move on. Advertising for a much higher selling price than the rest of the properties in the area, will affect the attractiveness of your property in a negative way. As buyers search online you will fail to show up in online searches if you are not in the correct price range for your ideal buyer. Be careful of the pitfalls of overpricing as some damages can not be undone. If you have overpriced your property initially, you will eventually be forced to lower your price if you are serious about selling. Clever and informed buyers will hold out to see how far you will drop the price before an interest is sparked. This changes the perception to a desperate seller - which leads to even lower offers.
Buyers are not concerned with your personal circumstances with regards to what you need to get out of the sale, they are looking for an investment and paying fair market value, much the same as you will when you purchase your next property. “A new trend which we have seen developing is where sellers move from one area to another, but the market in the new area is much higher than where they come from” noted Craig. Overpricing your property to ensure you can afford a new home in your new location will not pay off.
Other than the buyer, you also have the financial institution to consider. All banks require a valuation of any property they issue a bond for, and yours will be no exception. Your local valuation officer does not take into account how perfect you think your home is nor how perfect fit it will be for new buyer. The market rules the valuator, and he or she will evaluate your property accordingly. A bank has to protect their interests as well.
When the appraiser comes back with a market value that is noticeably lower than the price the buyer is offering, the bank is likely to decline the application. This can take you from a sure sale to a failed application, leaving you starting the process all over again.
How to avoid over pricing?
One of the things all buyers have in common with sellers who overprice their homes, is the belief that every home improvement they have made over the years translates into a one for one increase in value. Unfortunately that is not always the case in real estate. You might add improvements which suite you, however keeping the future buyer in mind, they could have other ideas of what they would like to do, and would prefer to pay lower and customise the property to their own taste, instead of paying for your improvements only to spend additional money to add their own touch. Home improvements and additions should be done with caution as this could put your property value over that of the area, and whether your home is a mansion amongst your neighbours – buyers looking in that area are doing so for specific reasons, one being price.
Use a real estate agent – professional agents will give you a fair and honest opinion regarding what price you would like to obtain. Real estate agents have access to networks, features and systems which you are not able to make use of, when calculating your home's value. Thus making use of a professional will ensure that you are correctly informed and given all the data needed so that you can decide whether selling is an option. Look at the comparable real estate sales data through the eyes of a buyer not as an emotional seller.
75% of Real Estate marketing success depends on the pricing of your property. “All of the marketing and advertising in the world will not sell an overpriced home. If you don't price your home correctly all of the rest will be pointless” Craig concluded.