Top tips for pricing property properly
Category Advice
There are many factors that determine the desirability of a property that's for sale. Residential property is, after all, often a highly emotional purchase that speaks to your dreams and aspirations. But ultimately, says Skoko Sebola, principal at Leapfrog Midrand, "the right price is what moves property".
A property needs to be priced just right, which means right for what the property is, right for the location and right for the market. "Time and again we see properties that are priced too high become stale on the market, while properties that are priced too low see the seller losing profit on the transaction," Sebola explains.
The right price is often the difference between a property being on the market for two weeks or two months. As such, it is worth considering the factors that have the most profound impact on the price of a property.
Timing is everything
The prevailing market conditions at the time of putting a property up for sale has a keen impact on how the right price is determined. In a seller's market, for example, there is typically less stock which means buyers are often more willing to pay slightly more for a property than they would have in a buyer's market. Similarly, the interest rate also affects what buyers are willing and able to pay for property. "At the moment the interest rate is still at a record-low, which means some buyers are able to spend somewhat more on a property than they might have been able to two years ago, for example," Sebola shares. Bear in mind though that this is not a hard-and-fast rule around buyer behaviour but rather a consideration worth bearing in mind.
The big L
Location is a factor wherever residential property is in question. "Properties, irrespective of its physical state, in desirable areas will always fetch more on the market than grand properties in less desirable areas. This is because it is far easier to improve the appearance and structural issues of a single property than improving the desirability of an entire area or location," Sebola says.
When it comes to pricing then, it is important to consider the appeal of the area and ensure the property is priced in line with other, similar properties in the area.
Also remember that buyers are extremely savvy and thoroughly research the market before even going to view a property. "Buyers know what the average for a given area is and what they can expect to get for that price. Your property may stand out like a castle among mud houses in the area but it's unlikely that it will fetch the price of a castle - the best you can hope for is the price of a fancy mud house!," Sebola says.
The state it's in
Alterations to the structure of the property and improvements to the layout and overall aesthetic to the property can go a long way in boosting the value of the property, but there isn't necessarily a direct link between what the seller has spent and what the buyer is willing to pay.
"The point is that there are some improvements that definitely add to the value, and thus the potential selling price, of the property, and other improvements that don't necessarily add value to the sale price. There's nothing wrong with replacing all the porcelain tiles with genuine marble in a two-bedroom townhouse, but don't expect a buyer to offer R500 000 more because of it," Sebola highlights.
Be realistic
For most sellers the goal is to shift the property as quickly as possible and this is exponentially easier when the property is priced right for its current conditions, for the area where it's located and the overall sentiment of the market at the given time.
"If most of the properties in the area recently sold for between R1 million and R2 million, it is highly unlikely that your property is going to sell for R3 million, even if you have spent R1 million on improvements," Sebola says.
A sensible way to approach pricing is to work with a trusted property advisor to ensure the property is priced just right. As far as possible, try to remove the emotion from the pricing decision and view it from a purely financial and transactional point of view, which is sure to get the best price in the shortest amount of time.
A professional understands the market and advises on price accordingly. "An agent can't guarantee a seller will get a specific price for a property - market conditions determine the ultimate selling price," Sebola concludes.
Author: Leapfrog Property Group
