Establishing the correct pricing for a house
The most important role that we have when working with vendors is setting accurately the correct asking price for a house. Value is often an emotive issue, and everyone has their own opinion about where their house sits, but it is the market that will tell us the correct value.
Usually, we prepare a Comparative Market Analysis (CMA), which is the equivalent of an X-ray of the local property market. In addition, we factor in other criteria that influence value, most notably location, character, size and facilities. Please note that cost (the amount you paid + improvements) and value are not related. Bear in mind that the CMA will also use prices of other properties that are currently listed, but not sold, so they may not achieve those prices.
Don’t fall into the trap of giving your property to the highest bidder – the agent who values the house at the highest price. Don’t overvalue improvements that you have carried out.
Today’s market trend is towards falling prices. In a rising market, you can often “get away” with an optimistic price because the market will catch up with you. However, in a falling market, even with a series of reductions, you may never catch up with the market. Your price is like a magnet – when the price is too high (the magnet), it doesn’t attract buyers (metal). As the magnet moves closer to market value it attracts buyers.
Incorrect vendor assumptions :-
1 “They can always make an offer”. The higher the price, the higher the expectations. Even if we get viewings, the clients won’t want it, we are attracting the wrong buyers.
2 “We can always come down”. First question a lot of clients ask is how long has it been on the market. Your first few weeks are critical, that is when interest is at it’s highest. If your home is overpriced, what you will in fact be doing is helping to sell a correctly priced house, which looks better value for money.
3 “We can try it at this price for a few weeks”. The problem is that the majority of activity takes place during the first 3-4 weeks that a property is on the market. So this would be the worst time to overprice. You would end up over pricing at the peak period, and then lowering the price when interest levels are reduced.
Market forces ensure that supply and demand determine price, not other factors. The next scientific rule to apply is that of gravity, when over supply = falling prices.
Clients search by price range, so if you are just a fraction too high, you will automatically be missing from the database searched by active buyers ideal for your property. When a house is priced correctly, it generates real interest, clients are excited, and make higher offers. We are even able to generate multiple offers, securing the best market price.
One more thought for you is that experience shows us that the 1st offer received is very often the best offer received. Extending this rule – the longer a home is on the market, the lower the final sale price will be.