Enjoy big benefits from pricing your home correctly

It is quite natural for sentiment to colour the value that owners put on their homes, especially if they have lived there for some time and have many happy memories associated with the property.

“Then there are those who will price a home they are selling according to what they need to acquire their next home, rather than in line with market reality, and others who believe they will naturally receive higher offers if they set a higher asking price,” says David Jacobs, the Rawson Property Group’s regional manager for the Northern Region and KZN.

“Indeed, in the current market where there is a shortage of supply in many areas, sellers are inclined to believe buyers are desperate and will pay just about anything for the home they want.

However, he says, this kind of thinking only leads to overpricing that scares off genuine buyers, and causes properties to go unsold for weeks and months at a time.

“Sellers need to appreciate that most serious buyers these days have made sure they are pre-qualified for a home loan, so know what price range to look in. And technology has made it very easy for them to then compare all the homes available in that price range, and to cross off any that appear to offer less value than others on the market for a similar price.

“In other words, they are very unlikely to even look at homes they perceive to be overpriced, and that results in sellers losing the interest of those who would have been the best candidates to buy their property in the most critical marketing period, which is the first two to three weeks after a home is listed.

It will then become more and more difficult to attract potential buyers, even if they do drop the asking price, because doing so just tends to make people believe there is something wrong with a property that has been on the market for a long time without selling.”

Jacobs says that if the sellers persist and do eventually lower their asking price, the most common reaction among any buyers that are left will be that the sellers are now desperate. This will certainly lead to them trying to negotiate an even lower price and in some cases making really lowball offers, with the result quite often being that the sellers finally have to settle for much less than the actual market value they could have got if they priced correctly at the outset.

“What is more, the longer the property is listed without being sold, the higher the holding costs for the seller and the more likely they are to miss out on the opportunity to buy their next house at the best price.”

When they decide to sell, he says, home owners should add up what it costs each month to own and run their home, including the bond repayment, municipal rates and service charges, insurance, maintenance and any levy. “The total could be quite a substantial sum of money, which is what their monthly holding cost will be from the time they list their property for sale until the time it is transferred into the new buyer’s name.

“They should then calculate whether or not a higher asking price that makes the home much more difficult to sell would compensate them for the holding costs that will be mounting up every month. For example, if their monthly holding cost is R20 000 and their asking price is R80 000 above the current market value of their property, any benefit they could have derived by achieving that higher price will be completely eroded within four months if their home is not sold and transferred by then.”By contrast, realistically priced homes are in high demand currently and will generally sell very quickly, enabling sellers to stop paying holding costs sooner and put that money towards the purchase or their own new homes, perhaps in the form of a bigger deposit that will lower their monthly bond repayments or enable them to pay their loan off faster.

“However, realistic pricing presupposes being in tune with the market – and this is where the guidance of an experienced, ethical estate agent can prove invaluable. Such an agent will not overvalue a home simply to secure a mandate – or talk down the price simply to secure a faster sale, but will apply his or her knowledge of the market and make use of a comparative market analysis (CMA) to arrive at a suggested asking price that is really in line with what potential buyers are willing to pay.”