Why properties do not sell
When deciding to sell your property you obviously want to sell it for the maximum amount possible but, you have to be very careful not to overprice your property.
The latest FNB Property Barometer data as of February 2021 shows the estimated average time a property is on the market until it is sold or withdrawn is now 9.4 weeks, however, sellers had to drop their asking price by an average 10% to achieve the sale.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 contact the listing agent to set up appointments to view when a new property comes onto 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 the property is not determined by what you paid for it, how much you need for your next purchase, what you spent on it, or what you 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.
Valuing your property correctly
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 time one can safely state the market value of a property is when that property has been sold! The market value of a property 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 pressure to buy or sell
- and the parties to the sales transaction are not related to each other in any way
However, the best way of approximating the selling price of a property is to have regard to the prices that were recently paid for similar or comaparable properties. This method is known as Comparative Market Analysis ("CMA") and the value derived from this 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 by using statistics from the deeds office as well as similar properties currently being marketed in the area.
By using the abovementioned method, a good estate agent will be able to assist you in establishing the correct asking price. However, it is important to point out that you cannot now still add an amount to this established value "for negotiating purposes" or even add the estate agent's commission fee, otherwise you will defintely overprice your property. The CMA pricing technique will include all these costs in the final asking price.