How to value your property correctly
PUBLISHED 15 NOV 2018
VALUING YOUR PROPERTY
It is not uncommon for sellers to seek inflated prices for their properties. However, it is not in the seller’s best interest either to under- or over-price a property, as a bona fide sale will only take place at fair market value and it is, therefore, important to start marketing the property at this price.
Establishing the correct price can never be an exact science and there are no formulas that can be used. The only time one can safely state the market value of a property is when that property has actually been sold! The market value of a property on a particular day will be:
- the price paid by a willing buyer to a willing seller;
- on that day;
- in a free and open market;
- where neither of the parties was under any particular pressure to buy or sell; and
- the parties to the sales transaction are not related to each other in any way.
The best method of approximating the selling price of a property is to have regard to the prices that were recently paid for similar or comparable properties. This method is known as Comparative Market Analysis (“CMA”) and the value derived from the analysis is based on the principles of substitution for a similar property. This is a value-based pricing technique and is applied to most second-hand residential properties.
We will provide you with the above-mentioned information in order to assist you in establishing the correct selling price.
WHY PROPERTIES DON'T SELL
According to the FNB Estate Agents Survey for the 1st quarter of 2018 the estimated average time a property is on the market until it is sold or withdrawn is 14 weeks and 1 day with 91% of sellers having to drop their asking price by an average 8.2% to make the sale. However, the latest data for the 2nd quarter of 2018 unfortunately shows a further weakening in the market with the estimated average time a property is on the market until it is sold or withdrawn is now 16 weeks and 4 days with 96% of sellers having to drop their asking price by an average 9.2% to make the sale.
At the top of the list of mistakes sellers are making is incorrect pricing, often with an instruction to the listing agent to put the property on the market at an inflated price and to “see what happens”.
Sadly, nothing good usually happens. Active buyers are watching the Internet and the papers for new releases and are quick to make contact with the listing agent to set up appointments to view when a new property comes on to the market. The most traffic passes through a new listing within the first two weeks, after which it tapers off dramatically.
Harsh as it sounds, the value of a property is not determined by what the seller paid for it, how much they need for their next purchase, or what they owe on the property. Buyers are well educated about property values so the only person likely to be fooled by over-pricing is the seller who is living with unrealistic hopes and expectations.
Also important is that the agent has access to a wide marketing platform that includes the top online property sites and social media. With more than 90 percent of South African buyers shopping for homes on the Internet today, it's critical that homes are well presented online, with a host of quality interior and exterior photos.
Sellers who don't grant easy viewing or show house access are also in for disappointment. No matter how good an agent is, they won't be able to sell a property if it's seldom available to view.
Selling is hugely inconvenient, not least of all because one needs to be show house ready and available for viewing at the drop of a hat. Serious sellers accept this and if they can't get away from work to open up, they will entrust keys to a family member or friend. The bottom line is that the more accessible a property is to buyers, the sooner it is likely to sell and the better the price it's likely to achieve. It is, therefore, imperative that the property be correctly priced to ensure a quick sale as the longer the property stays on the market, the difficult it would be to achieve the right price.