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The Price is right?

10 Aug 2011

The correct pricing of property is the best catalyst for finding the right buyer in the shortest possible time, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

In the current market, over pricing has led to many properties being on the market much longer than they should be, and the longer a property is on the market, the less likely it is that the seller will get their initial asking price. Statistics show that a property sold within the first four weeks is generally sold for the seller's asking price - if priced correctly. Houses that stayed on the market for five to 12 weeks sold for 3% less, 13 to 24 weeks for 6% less and houses that were on the market for 24 weeks or more sold for more than 10% less than the original asking price.

The biggest question that most sellers have is how the value of their home is determined when it is being priced by a professional estate agent.

Goslett says that the first factor to consider when accurately valuing a property is the current market conditions. "The conditions we are experiencing will have a large impact on the manner in which property is priced. What is deemed as a fair market value today will be a lot different from the values we saw during the boom period," he explains. "Currently we have a situation in the market where there are more sellers than there are buyers and buyers are spoilt for choice when it comes to the available investments options. Property pricing is generally synonymous with demand. So at the end of the day, what this means is that the pricing of a property is largely determined by what buyers are prepared to pay for it," he says.

But how do sellers find out what buyers are willing to pay for their property? Sellers should seek out the expertise of an estate agent who operates in their specific area. It is their job to be able to guide you in the correct pricing of your home based on a comparative market analysis. An estate agent who is well versed on the property market trends will know what is selling and for how much.

"Essentially, estate agents use the statistics and information from the specific area in which the property is located to determine value. A lot of these statistics are compiled from data received from internet research sites that have actual prices paid for homes in that area over the past three to six months as well as their own statistics that have been gathered from working within that area and market," says Goslett.

There may be a perceived value of property in an area based on over pricing and ambitious marketing, however gathering the data on what prices homes actually sold for, will give a clearer picture as to what buyers are willing to pay for property in that area.

Once the figures have been gathered, estate agents will perform a comparative market analysis (CMA), explains Goslett. "A CMA is used to determine accurate market values by comparing other similar properties that have recently sold in your area with the property that is currently on the market. Determining the average price per square metre and by analysing what houses of a similar size as yours sold recently for, will give the agent a solid price base to use to determine a reasonable asking price for the property in question."

Working from this base an estate agent will be able to factor in other elements that are specific to your house and will have an affect your properties exact value. Factors that are taken into consideration include the home's position within the area, as, in some instances, houses closer to a noisy main road or freeway could be seen as less desirable than a house in a quiet street or cul-de-sac, for example. Other factors would include the condition of the property and its size, security features, finishes and fixtures throughout the home and any other features that could set the house apart from others on offer in the same area.

"It goes without saying that a property that is well looked after, aesthetically pleasing and needs little or no renovation will fetch a higher price than a property that needs a lot of attention," advises Goslett. "As with most items available for purchase, property has a higher commercial appeal if it is clean, maintained and well presented," he concludes.