Picture: Berry Everitt, CEO Chas Everitt International property group; Lanice Steward, head of training Pam Golding Property group.
It is key that a home be priced competitively to lead to a good sale for the owner in the shortest possible time. However, home owners often over-estimate the potential selling price because of the value their property holds for them.
There used to be a belief in the real estate market that “whoever controls the stock controls the market” – in other words that an agent who held a large number of mandates in an area could to a great extent control the supply of properties in response to high or low demand in that area, and thus manipulate home prices in favour of their clients and themselves.
“And in pursuit of that belief, we often used to see certain agents just scrambling for as many mandates as they could get in their areas of operation by simply ‘outbidding’ their competitors on every estimated selling price, almost without reference to actual market conditions – and sometimes with really negative consequences for the home sellers,” says Berry Everitt, CEO of Chas Everitt International property group.
Now, though, everyone is thankfully much better informed, and there is wide consensus that the real estate market works most efficiently and in the best interests of all parties when the right stock is available at the right price to interest and engage as many potential buyers as there are.
Estate agents have an essential role to play in ensuring that this happens.
First six weeks are golden
After a further reduction of the interest rate in May, it is now cheaper for many people to buy a home than to pay rent. Combined with factors such as a favourable lending climate at the banks and a zero-transfer rate for properties priced under R1 million, this has led to an unexpected amount of home buying activity since June.
In such a buyer’s market it is particularly important that a home be priced right. Most home buyers today do their own research online and will soon spot if a property is overpriced. “Particularly first-time millennial purchasers are watching market trends and prices achieved to ensure they make informed, intelligent offers,” says Lanice Steward, head of training for Pam Golding Properties.
It is natural for owners to over-estimate the potential selling price of a home because of the value the property holds for them in personal terms. “This could easily lead to buyers rejecting the property because they regard it as being over-priced relative to similar homes for sale in the same area. If that were to happen in several instances, the area could develop an oversupply of homes for sale that would most likely cause prices to fall,” Everitt explains.
Research shows that the first few weeks of marketing a property are the most important. This will be the time period that generates the most enquiries and interest. “For properties that are priced accurately, this could be a golden window of opportunity and could work to their advantage. However, for properties that are overpriced, combined with a lower level of buyer activity, once this period has passed, it may be a considerable amount of time before any more interest is generated,” comments Mike Greef, CEO of Greeff Christie’s International Real Estate.
However, qualified and experienced agents will have the right information to assist sellers to set competitive asking prices that attract the maximum number of potential buyers and result in satisfactory sales in the shortest possible time.
Factors to consider before setting an asking price
Of course, the question then becomes: “What is the right information?” or “What are the factors that the agent needs to consider before recommending an asking price?” Everitt lists the following as the most important factors to consider:
Location, location, location:
- The desirability of the area (rising/ declining/ static)
- Proximity to sought-after elements such as shops, schools, workplaces, medical facilities and entertainment venues
- Proximity to potential drawbacks such as a busy road, a noisy business or an unfenced, open piece of land
- Proximity to any planned future developments of new roads, shopping centres, business parks or residential complexes
Information about property sales in the area:
- How many similar homes are currently for sale in the same area? Is this number increasing or decreasing monthly (the rate of uptake)
- How many similar homes in the area have been sold within the past few weeks, and how many have failed to sell and been withdrawn
- The actual prices paid for the homes that were sold and as much detail about those properties as possible in terms of size, floorplans and condition, so that the level of similarity to the client’s property can be closely determined
- The asking prices of the homes that did not sell and were then withdrawn, as this will indicate where the price ceiling for the area is
- The direction that prices in the area are currently taking / or are likely to take as a result of either more demand than supply or more supply than demand.
Professional agents, who know their areas well and are very active there, should not have any trouble pulling most of this information together very quickly. They will then be able to recommend a narrow asking price range calculated to engender the most positive response from potential buyers.