As a real estate professional, I quickly learnt the three cardinal rules to selling real estate; price, price, and price.
The number one reason why a house doesn’t sell simply boils down to price. Assuming the property has been professionally marketed, setting the right or wrong price, can make or break a property sale. You’ll easily find out if your house is within market expectation by the first two weeks of any marketing campaign, when the campaign is at its most important and most active stage.
Buyers vote with their feet
After the property has been marketed for a few weeks, and the house is open for inspection, if low numbers of buyers are coming through your doors, it’s a strong indication the property is overpriced. The marketing your agent does will get the attention of the buyers, the buyers will then vote with their feet.
While there are exceptions to every rule, in general buyers will make offers when the asking price for a property falls within 5% of market expectations. For example, if most buyers believe your house is worth around $500,000 and the asking/advertised price is $550,000 I would expect your property to stay on the market until either inflation or market forces pushed prices up to your level, or you reduce the asking price by at least $25,000.
The risk of overpricing
The risk sellers take if they overprice their house is that eventually they may have to reduce their selling price to attract buyers. If sellers do reduce the price, the property will have been on the market for so long that fewer and fewer buyers will take notice. Once a buyer has dismissed your property, it’s hard to gain their attention again, potentially stretching the time your property sits on the market from days to months.
If a property has been sitting on the market for more than a couple of months, the market tends to stigmatise it; buyers believe there is a problem with property, other than the price. Often home sellers end up selling their property for less than what they could have if the correct pricing strategy was in place from the very beginning.
Who is responsible for overpricing property?
In my experience, there are two main culprits in overpricing: owner-occupiers, and stray real estate agents. Owner-occupiers, in particular those who have either built the house, or have lived there for a very long time, are more likely to believe their property is worth more than market price. Owner-occupiers often tend to sell with emotion, and asking for a higher selling price, helps them justify letting go of memories and moving on.
Real estate agents can also be at fault for overpriced properties; these are the agents that give our profession a bad name. Although most agents out there are genuine, hardworking professionals, there are always going to be a few bad agents that tarnish the industry.
When deciding on the right agent for you, the biggest red flag you can see will be their ‘expectation’ on price. Always be cautious of any agent telling you the market will pay significantly more than what other agents have estimated. This is called ‘buying a listing’, and the odds are that agent will break your heart after a couple of weeks on the market.
The right agent and the right price
Before deciding on a price, I recommend that vendors take a good look at some recent sales, and what’s currently on the market in the area, as you’re in direct competition with those properties.Take your time when it comes to interviewing and choosing the right real estate agent for your property sale. The right agent will be honest and give you an achievable price within market expectations. A good, dependable agent will show you sales history from properties in your neighbourhood, and give you a property valuation based on numbers, not on sentiment or a showy sales pitch.
Take your time when it comes to interviewing and choosing the right real estate agent for your property sale. The right agent will be honest and give you an achievable price within market expectations. A good, dependable agent will show you sales history from properties in your neighbourhood, and give you a property appraisal based on numbers, not on sentiment or a showy sales pitch.