Why the price 'sweet spot' matters when selling property
Category Newsletter: Lead Article
Pricing something just right is never easy - irrespective of whether it's a pre-loved couch or a comfortable family home.
Price it too high and many potential buyers won't even take a look, irrespective of value of the item, but price it too low and you risk creating the impression that the item is of a lower value, asking "what is wrong with it that it is so cheap".
The right price is especially important when it comes to pricing a property for sale, and the same principles apply whether it's a two-bedroom flat or a multi-level luxury mansion.
Skoko Sebola, Principal at Leapfrog Midrand, shares that when priced right nearly every property will sell faster than expected, irrespective of prevailing market conditions.
"Sellers often mistakenly believe that pricing a property high allows for downward negotiation, but the opposite tends to happen. Potential buyers see the high price and immediately lose interest," he says
The "right price" when it comes to property destined for the market is market related but also takes the features and condition of the property into account.
The right price is the sweet spot that considers the condition of the property, the location, the average price similar properties in the area have sold for in recent months, as well as the expectations of the seller.
The right price, the first time
It is important for sellers to understand that the market is ultimately what determines the price, not what you paid for the property initially, or how much you spent on renovations or what you think it should be worth.
"Sellers will sometimes argue that because, for example, they paid R2 million for a property five years ago so it must be worth 3 Million now, but that's an oversimplification that doesn't take the dynamism of the market into consideration," Sebola explains.
Similarly, sellers often expect to earn the money they spent on renovations back - plus more - but the calculation isn't necessarily that simple. In some cases R1 million's renovations will add that much value to a property but in many other cases the value will be subjective - valuable to the property owner doing the renovations but not to the taste or preference of a potential buyer and thus not of the same value.
The goal when selling a property is always to move it as quickly as possible, before it becomes "stale".
"There's a psychological aspect to seeing a property that has been on the market for months - potential buyers tend to avoid it, believing there is something 'wrong' with the property. And most often the reason that property hasn't moved is because it is not priced right," Sebola shares.
Location, of course
As with almost every consideration pertaining to property, location plays a critical role in the pricing of a property too. The right price is one that is comparable to similar properties in the area.
Potential buyers are likely to be very familiar with the market in which they are looking, which means the property needs to be competitive with other, similar properties in the area.
Acknowledge the emotion
It is not unreasonable for sellers to have a price in mind that they believe the property should sell for, which is most often rooted in the emotional capital they have invested in the property.
"Price is an emotional thing for many of us - and property comes at a big price - so make sure to acknowledge your feelings about it. This is where it is particularly pertinent to draw on the expertise of a property professional who can view the situation more objectively and thus advise on price accordingly," Sebola says.
Consider the difference between price and value. Price is based on a market-related estimate for your property, based on industry trends and research, demand in the area, as well as the features of your property, while value is more subjective and determined by what a buyer is prepared to pay for a property.
Author: Leapfrog Property Group
