Buyers want it to be lower and sellers want it to be higher. Somewhere there needs to be a compromise by both parties, but where exactly is this point?
The latest statistics from First National Bank show that 80% of sellers still have to drop their asking prices in order to achieve a sale. “And the average drop is around 12%, which means that most sellers are quite seriously out of step with what buyers are actually willing or able to pay,” says Berry Everitt, CEO of the Chas Everitt International property group.
“Such sellers will usually argue that prospective buyers are quite at liberty to make lower offers, but the fact is that serious buyers will usually not make any offer at all on a home they consider to be overpriced, especially if there are many properties on the market for them to choose from.
“Others will shy away from making a lower offer because they don’t want to offend the seller, even if they really like the property.
“And sellers need to face up to the fact that buyers usually know the market better than they do. Sellers may look at a few homes before listing theirs for sale, but buyers have frequently looked at dozens of homes over a few weeks or months by the time they decide to make an offer – and acquired a finely tuned idea of value as well as a sense of which way the market is tending.”
So if your home is not attracting any interest after a couple of weeks on the market, Everitt says, you should really consult your agent and seriously consider lowering the price as soon as possible.
“Sellers who do this when the listing is relatively new and the home still fresh in potential buyers’ minds stand a good chance of keeping the marketing momentum going. Those who don’t will, inevitably, end up with an unsold property that is stale or about as attractive to buyers as last week’s bread.”
Martin Schultheiss, CEO of the Harcourts Africa property group, says there is little reason to make uneducated offers in the prevailing market.
“Buyers are currently king in the local property market and can afford to consider carefully before making an offer to purchase. And the fact that most sellers are keen to sell does not mean that many do not try their luck by overpricing their properties. Indeed, according to FNB figures more than 80% of properties are currently sold for 12% less than the asking price.”
He advises prospective homebuyers to do their homework before making an offer on a property. “The price you offer should be based on local market conditions, including recent prices achieved for similar properties in the area, as well as the condition of the particular property.
“Find out how long the property has been on the market and if the current asking price is lower than the initial price. If the property has been languishing on the market, the owner may well be prepared to lower the price further in order to achieve a sale.
“It is also useful to establish whether or not the seller has already bought another home since he may be willing to accept a lower price if you have a sizeable cash deposit and have been pre-approved for a bond at a bank – both of which will speed up the transaction.
“Seasoned estate agents marketing a property will be able to supply much of this information and while they principally represent the seller, they will readily supply answers when prompted.”
Schultheiss cautions, however, that buyers should not get so enthusiastic about negotiating the price down that they lose the opportunity to buy a home they have set their hearts on.
“Making a ridiculously low offer is likely to achieve little more than a flat refusal from the seller to entertain any further negotiations. Rather ask the agent if the seller has indicated his willingness to negotiate – and what limits he has set.”
Ian Slot, Seeff’s regional manager on the Atlantic Seaboard, says there is still a vast amount of overpricing in the market. “Sellers’ preparedness to adjust their pricing has a lot to do with their reason for selling, personal financial circumstances and the market they are in. In the Atlantic Seaboard and City Bowl area the majority of truly serious sellers who are most likely to adjust their prices correctly, tend to be selling in the middle to lower price categories.”
When asked whether buyers have become more sophisticated and informed, he said sellers tend to be more inclined to listen to sound advice provided it is supported by a proper Comparative Market Analysis, comparing their property to what else is on the market. “The problem is that with the Internet there is so much information available, but it is often difficult to test the veracity of that information or to drill down properly on the comparatives. As Warren Buffet so eloquently put it: ‘Price is what you pay. Value is what you get’.”
In terms of practical changes sellers can make to up the price of their property, Slot said they must always ensure their property presents well. “A lick of paint or some minor improvements to bathrooms and kitchens can sometimes make all the difference.
“The simplest and cheapest things sellers can do are to remove clutter and neaten up, but before you spend any money, speak to an agent who is an expert in the area. They will know what the market is looking for specifically in that area and what changes are likely to put more money in the seller’s pocket and what are not.” – Eugene Brink
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