Pricing Your Property
You may have ‘heard’ what similar properties in your area have sold for, but you can’t rely on hearsay. You need to weigh all determining factors in any market. The fact is values change, relative to the present market. The market determines each day the current value of your property, not the consultant, nor the owner.
The single most important factor in effectively selling your property is the price itself. To sell your property at the best possible price it is important to select the price itself very carefully. The price has to appeal to three people: the buyer, you and the property consultant.
The closer your price is to the actual current market value the sooner it will sell. Overpricing can be disastrous causing competing properties to look more attractive. A good consultant will also make sure you don’t under-price your property, so that it is snapped up immediately and seen as a ‘bargain’. Ideally a better outcome is to achieve the highest sale price by allowing your consultant time for their marketing and sales strategy to be effective.
A market analysis should be carried out by a consultant with the expertise to evaluate all market conditions and choose the very best price to maximize your sale. This is done using a combination of methods:
What are similar properties selling for in the market at present?
What properties have sold recently in the area of similar design, construction, age and condition?
Adding together the value of the land, building, improvements, fixtures and fittings.
On its own, this figure is irrelevant, but if there are a number of properties sold in an area that have a similar government valuation, then it can be determined that current sale prices are selling on average a certain percentage above the government valuation. This will vary greatly between suburbs.
Method of Sale
An expert consultant will recommend the best method of sale depending on the current market and the area within which you live. Methods of Sale include:
BUYER PRICE ENQUIRY RANGE
A buyer price enquiry range is set to attract buyers looking within that range. The starting price is clearly stated, as is the price you would like to achieve. This creates a good negotiating environment where buyers can look at homes in their price range, and sellers can offer their homes for sale without a predetermined asking price.
Genuine buyers will usually base their submission upon the condition, location, and the fact that they may miss out if they don’t put in a reasonable offer.
Tips for setting the starting point:
- Buyers look at the location first and the price second
- Buyers don’t think in terms of ‘a price’, they think of a ‘price range’
- Buyers look 10-15% below what they eventually pay
- Buyers will make their best offer when the property first comes on the market
- The longer the property is on the market, the less the buyer will pay
This method should be considered as it reduces your fear of under pricing and eliminates the negative impact of overpricing. It also allows the successful sale of your home to be achieved by the quality of the marketing and skills of negotiation
An ‘Offers Over’ approach is designed to get people interested in looking at your property in the same way that the retail store uses ‘from $1.99’. The goal is to attract as many people as possible to come and view your property in the hope of creating competition, multiple offers and a premium price as a result. While it doesn’t preclude someone making an offer lower than the stated figure, it does help to give buyers an idea of what the expectations of the owner are. It is also helpful when negotiating with a purchaser who submits a low offer as it serves to justify a ‘Counter-Offer’.
When setting your ‘Offers Over’ amount it is important that it is not more than ten percent under the price that you are willing to accept as it could be deemed as false advertising.
An asking price on a property tends to become the point from which buyers negotiate down. Sellers expect buyers to offer less than the asking price and take this into account when setting the price. This disadvantages both parties, since genuine buyers may be turned away by the asking price, not looking at the property at all. Sellers may not always be certain that they will be able to get the best sale price.
This method should be considered in a ‘buyers market’, rather than in a ‘sellers market’. If this method is chosen it is advisable to price the property as close to what you hopefully want to achieve. In a ‘sellers market’ history shows that other methods of sale should be considered first, so as not to put a limit on the selling price.
FOR SALE BY AUCTION
A property can be put up ‘For Sale By Auction’ on a specified time and date. Alternatively it can go on the market as ‘For Sale Now or By Auction’. This means the property can be sold from the period it enters the market, right up to the time set for the auction.
These methods are recommended if it is a property where buyers will be motivated by emotion. It is quite common that properties are sold prior to the auction date when this method is used.
A straight Auction sale is recommended where there is an estate with trustees and a number of beneficiaries, or where there is no doubt that sufficient genuine bidders will compete on the day.
A reserve or minimum sale price is fixed, and that figure is known only by the owner of the property and the auctioneer. It is wise to hold off setting the reserve price until just before the auction time. The auctioneer’s objective is to get a higher price than the reserve, in the competitive auction atmosphere. If bidding does not reach the reserve and is passed in (not sold) then the highest bidder can be given first opportunity to negotiate with the vendor for the purchase of the property.
Private Inspections vs Open Homes
You need to balance your need for privacy against your time frame to sell, and the need to help create competition in the market place. Don’t be swayed by fear or scare tactics, or by those who claim that they work harder by not having open homes. Achieving the best result will come (in part) from exposing your home to the largest possible number of buyers to create competition, which drives up the negotiated result.
Advantages of an open home:
- Creates more visual impact.
- Generates more activity.
- Exposes your home to more potential buyers
- Creates more competition, helping achieve a higher price
Selling First vs Buying First
Historically it has been shown that financially you are much better off to sell before you buy. This way you will not find yourself at a disadvantage at the negotiating table, feeling pressured to accept an offer that is below- market value because you need to meet a purchase deadline.
If you’ve already sold your home, you can buy your next one with no strings attached, and when in competition you will be in a better and stronger position to negotiate.
If you do get a tempting offer on your home, but haven’t made significant headway on finding your next home, you can put a clause in the contract of sale which gives you a reasonable time to find a home to buy.
Alternatively you can put in a long vacant possession clause (e.g. 3-4 months) and look at renting for a period of time if you need to.
Selling First & Buying Second
- There is no pressure to sell.
- You will negotiate a better price.
- You can dictate the terms.
- You have the confidence to buy.
- You know how much you have to spend.
- You will be in better position, when in competition against others who have to sell first, when buying your next house.
Buying First & Selling Second
- There is no confidence in looking.
- You lose your negotiation power and pay top dollar.
- You are under pressure to sell within a time frame.
- You tend to be stressed out causing you to sell under what your home is worth
Download these tips and more for FREE in the Official Petrusma Property Selling & Buying Property Guide.