The importance of correct list pricing for successful property sales
Category Property News
As a real estate seller, one of the most critical decisions is determining the right list price for a property.
This is more important now than ever, because while the real estate industry mantra has always been "location, location, location", economic realities are increasingly forcing buyers to think "price, price, price" first.
Market-related listing is critical across all real estate segments from industrial to residential. It stands to reason that the higher the value of the asset, the more important it becomes to understand the pricing sweet spot if you want to liquidate funds for reinvestment.
Correctly pricing your high-value fixed asset isn't only a financial decision but also a strategic one that can significantly impact the duration and outcome of a sale.
In an ideal world those would be the only two determining factors in pricing property, but as with just about everything else, reality is more complicated because it involves people.
About 70 years of research confirms what all property professionals know; emotion plays a massive role in real-estate investment decisions.
People aren't as rational about buying and selling homes as they are about other, less emotive, investments like comparing the performance of pension funds. Homes are aspirational life choices that merge financial and emotional expectations.
The danger for sellers lies in emotional decision-making, with a narrative that reads: 'My home is special, and the right buyer will see it'. If that is the starting point, it's almost inevitable that sellers will price themselves out of the market before they're even out of the blocks."
Pitfalls of Over-Pricing
Residential sellers overwhelmingly want to deliver their properties to people who'll love the space as much as they do.
But setting a price point to attract only 'serious buyers' rather than a market-related price is thinking with your heart, not your head, and could scupper any chance of a sale.
Fewer Prospects: In today's competitive real estate market, buyers are well-informed and have access to extensive property data. Prospective buyers therefore know when properties are priced above market value and they don't like being taken for fools.
Lengthy Time on the Market: Online property portals allow buyers to quickly and efficiently compare local market stock. The longer a property sits unsold, the more potential buyers browsing for new listings will question its desirability or condition.
Discounting Negatives: If reality strikes when homes don't sell quickly and asking prices go down, owners risk creating an impression that they're desperate or lack confidence in their properties. Prospective buyers are likely to suspect there are any number of issues from structural to problem neighbours - perceptions that can be challenging to overcome even at more attractive prices.
Over-Exposure: Serious buyers frequently browse real estate websites for new listings, so a listing they've seen 20 times will be ignored. The longer an over-priced property remains on the market, the more stagnant it becomes. If your house has been on sale for ages without a nibble, take a step back and try to review the asking price from a financial and strategic perspective only. When you've revised the price, insist that your broker also completely revises the online listing with new visuals and a fresh property description that will bring previous browsers back to reconsider your sale.
Sellers must get real with their asking prices to sell in this market:
While there are always exceptional areas, the reality for the market is that with fewer buyers, a slower pace of sales and lower prices being offered, sellers must now be realistic with their asking prices.
After a buoyant few years' the market has slowed notably this year with some areas seeing a decline of up to 30%-40% in sales activity compared to the highs of 2021/2. Buying power has been affected by the higher than expected interest rate and while we are pleased that it has remained stable, it remains an impediment for the market for the foreseeable few months.
Two years ago, the market was flooded with buyers looking to take advantage of the low interest rate with offers flowing in, and prices climbing. Properties were selling within a week to a month of listing in many areas and the good times were rolling for sellers.
While the market started its downward curve towards normalisation by early 2022, the reality is that the higher-than-expected interest rate has put tremendous downward pressure on sales volumes and offers.
Sellers will, however, need to be realistic with their asking prices, and if your price is out of step, you will need to drop your price.
Author: Helen Melon Properties