Setting the price on your property at the beginning of the advertising campaign has the potential to make or break your sale. People often underestimate the power that the advertising price can have to attract or repel buyers and as a consequence, many properties are undersold due to the incorrect pricing in the market space. Whilst this knowledge may provide some opportunities to purchase at a discount, when selling your own property, naturally you want buyers attention on your property and this article discusses the obstacles and the potential outcomes of correctly and incorrectly priced properties. Rest assured that if you get the price right, this single element of the sale has the power to propel your result to a premium level.
Overpricing:
The most common form of incorrect pricing is overpricing. It is natural for the owner of the property to overstate the value of their property for a number of reasons. For some people, they planned for a 'cautious' approach and added a bit extra on top of what they really would sell for so that they are able to negotiate downwards if needed. For other people they genuinely see benefits of their property that other people may not see. There may be a certain sentimental attachment or other reasons that lead a property owner to overprice their property.
This supposedly cautious approach is actually extremely damaging to the sale and virtually always leads to the most active buyers rejecting the property. In this age of readily available information online, buyers tend to be particularly knowledgeable on what good value looks like. In this circumstance the best potential buyers for a property may still notice the property but not consider it seriously if they feel the price is not fair. This lack of attention leads to a reduced energy from the buying public towards the property and ultimately the home sits on the market unsold. What typically happens from here is a series of price reductions until the property is priced in line with the markets expectations. The problem however is that the best buyers have already rejected it and either bought other properties or are focussed on new listings. This means that the opportunity to create a good energy from buyers toward your property and create momentum that turns into competition has been wasted and instead of having multiple buyers lining up for your property, there may be one opportunistic buyer that makes an offer and usually a compromised outcome is agreed upon. You only get once chance to impress the market and build momentum.
Underpricing:
Sometimes the market was not assessed fully and a property arrives on the market at a price that is below the expectations of buyers. In this circumstance a quick sale often results as multiple buyers usually notice the home and rapidly take a serious interest in purchasing it. If the property is offered for private sale and multiple offers are made simultaneously, it will take a highly skilled agent to negotiate the best possible outcome for the vendor and ensure the property is not sold too quickly or for less that it could have been sold for. Sadly what usually happens is that the agent is not highly skilled in this area and the property sells quickly but for an average price.
On the other hand, if the property is underpriced and offered for auction an interesting scenario begins to take place. The auction is usually scheduled for around four weeks from being listed which gives multiple buyers the opportunity to inspect and become interested. In this scenario, a high level of excitement and energy from buyers develops. As the auction date draws closer, tensions mount and buyers prepare themselves financially and emotionally for the competition at the auction. A competent agent has the ability to create the right competitive environment and prepare buyers for the eventual selling price in advance of the auction day. If the auction process itself is facilitated by a proficient selling agent and auctioneer, they will protect the underpriced seller from selling for less than the property is worth. Naturally if the agent believes that the property is actually underpriced, they are required by law to update their advertised price guide to reflect their genuine expectations of the eventual selling price.
It is this increased energy and attention from buyers who are brought together in a competitive environment that leads to some very high prices being obtained. In scenarios where the estimated selling price has been underestimated, the reserve price at the auction is usually exceeded as multiple buyers fight it out.
Accurate pricing:
It takes a thorough market knowledge, an in-depth assessment of comparable properties, consideration of other homes on the market and an unbiased view of the subject property to get the pricing accurate. In spite of careful consideration, getting the price right is not always possible as there are many factors involved that can be unforseen such as other new listings that are comparable, interest rate changes, change in buyers sentiment or unpredictable elements such as restrictions on the title, tenancy, neighbours and so on. There are several signals to help determine whether the asking price is correct. In this scenario a reasonable number of buyers turn up to inspections and consider it seriously, activity on the property websites are examined and show average page views, buyers have a average level of energy toward a home and will be likely considering other similar homes as well. Accurate pricing is likely to attract the right buyers and leads to a fair sale result within a reasonable time on the market.
The price you choose to advertise your property for has a complete bearing on what happens next in your sale transaction so it is vital to make the best assessment possible whilst carefully considering all the elements before advising potential buyers of what the price is to ensure that you maximise the potential in your property. As always it is crucial to appoint the right estate agent to help guide you through this important decision making process to make sure your property is noticed amongst the many properties that are available at any given time.
For all real estate related information or advice, contact the author Simon Wendt, Licensed Estate Agent at Hockingstuart Mentone on 0407 040 706.
