Asking a too-high price for your home can end up costing you dearly
There’s no denying that now is not the easiest time to sell a home.
Property price growth has been slow, the market has been less active than normal and buyers tend to have the upper hand when it comes to negotiations.
Despite this, Schalk van der Merwe, franchisee at the Rawson Properties Helderberg Group, says property agents around the country are reporting record numbers of sellers who are over-inflating their listing prices.
Their motivation is if they are willing to wait, they will eventually find a buyer ready to pay the price.
But this approach does sellers a “huge disservice” in more ways than one.
“What a lot of sellers fail to factor in, or factor in incorrectly, is the opportunity cost of certain choices. It can be very tempting, for example, to choose an agent with the highest valuation or insist your agent lists your home above their recommended price point, but the opportunity cost of doing so can be far higher than you may have expected.”
He says the biggest opportunity cost of overpricing a property is not just that it won’t achieve the inflated sales price but that it’ll probably sell for below market value as a result of overpricing.
“Today’s buyers can spot a rip-off from a mile away and they have no time or patience for overpriced listings. As a result, these properties tend to sit on the market indefinitely, getting zero attention and developing a negative reputation for appearing to be unsellable.
“Sellers are then forced to drop their prices drastically to overcome these negative associations – far more than the normal price adjustments you see happening – and typically end up selling for below their true market value.”
But the difference between this eventual sales price and the price they could have achieved if the property had been listed at a market-related price point is not sellers’ only opportunity cost.
“Delaying the sale of your home, or dragging out the sales process can introduce a number of other opportunity costs to the transaction. From extending upfront costs like property maintenance, security, insurance and rates and taxes, to losing out on the chance to buy another property or missing out on earning interest on the proceeds of your sale, taking longer to sell comes with a surprisingly high price tag.”
Sellers might be seduced by the idea of a higher price only to end up making far less off the transaction than expected.
“As agents, we can never guarantee an exact price from a willing buyer but our recommendations are always designed to achieve a sale in the least possible amount of time, with the least inconvenience and highest price.
“In striking this balance, we can minimise opportunity costs to our clients and make sure they walk away with the most profitable outcome possible – even if their initial listing price was lower than they originally expected.”
Van der Merwe says, however, that some agents would “rather promise the earth” to get the sole mandate and then disappoint their clients when the sale takes forever and pays bottom dollar.
“It’s more difficult to win a client’s trust by presenting a realistic picture that accurately manages expectations.
“Ask your agent to back up their valuation with a comprehensive comparative market analysis and get some word-of-mouth referrals from sellers who’ve used their services in your area.”