Private Sale Property Pricing
The property price dilemma
As a homeowner selling your home you are faced with a dilemma when
setting the asking price for your property. Ask too much and you risk
your property sitting on the market for months without attracting
any offers. Ask too little and you lose out financially. Faced with
this choice many homeowners set their asking price too high believing
that they can always lower the price if the property doesn’t
sell. However this can have disastrous consequences for the value
of your home.
Setting the correct price is the most important part of selling your
home. Whether selling your home FSBO or through a real estate agent
it is vital to get the asking price right first time. Your aim is
to sell your property in a reasonable amount of time and to get on
with living your life, in order to do this you must set a realistic
price.
Buyers know the real estate market
Buyers are often well researched when it comes to the current real
estate market. Therefore if a property is overpriced, it simply won’t
sell. As a homeowner you may well feel that a prospective buyer can
always make you an offer but in many cases buyers will simply walk
away. It is said that a reasonably priced property will attract reasonable
offers but an excessively over priced property will attract no offers.
If a property is over priced and doesn’t sell it will sit on
the market and will quickly become stale. Buyers will recognize the
property as having been on the market for some time and assume that
there must be something wrong with it; the property will have gained
the reputation of being a lemon. If you overprice the house to test
the market and then reduce the price later, it signals to buyers that
the property was and may still be overpriced. Homes that are listed
through real estate agents are particularly vulnerable as many agents
give homeowners inflated valuations on their property to try and secure
the listing. The owner is later conditioned by the agent to accept
a lower offer that is often less than the true value of the property.
Factors affecting the price of your property
The amount of time that you have to sell your home will affect its
sale price. Any property will sell if the price is low enough. If
the real estate market is slow and you need to sell quickly you may
have to accept a lower price to sell you property. By offering a property
for sale at a lower price the pool of potential buyers is expanded
as the property becomes attractive to real estate investors who either
want to rent the property to tenants or renovate and sell at a profit.
If you are not in a hurry to sell your property you can concentrate
on appealing to homeowners rather than investors. Homeowners are less
likely to be concerned about rental yield and profit margins and will
pay more for a home that they fall in love with.
Some factors other than time that affect the price of a property
are:
Property Location: You can’t get away from
this one; the cliché location, location, location is well known
because it is true. If your property is located in a desirable area
that is in demand, you will be able to get a higher price than you
can for the same house in a less desirable area.
Property Condition: A house that has been well maintained
and can be moved into without the new owners having to undertake any
major renovations will always sell for more than one that has been
neglected and needs work.
Desirable amenities: If your house has popular amenities
such as parks, schools and shops close by, it will sell for a higher
price.
FSBO and property prices
As a FSBO homeowner you are in a fantastic position in that you can
under cut your competition (properties listed with real estate agents)
and still keep more of the equity in your pocket as you have no real
estate agent’s fees to pay. However a significant number of
FSBO owners erode their competitive advantage by asking the same or
more than properties listed through an agent.
Opinion is divided as to whether buyers would rather buy direct from
the owner or through an agent. Some people feel that buyers prefer
to negotiate through an agent, as they can be more honest in their
feedback, therefore if these buyers are to be enticed to consider
FSBO properties they need a reduced price to attract them. Others
feel that buyers would rather deal direct with owner rather than have
to put up with the deceit and games played by some agents. Having
dealt with many agents and FSBO owners I would rather deal direct
any day.
Whether the prospective buyer prefers to deal direct or would rather
be negotiating through an agent one thing is for certain. The buyer
knows that the homeowner is saving a considerable amount through not
having to pay commission and will expect the homeowner to share some
of this saving with them.
Any sensible FSBO vendor will share the saved commission with the buyer
by accepting a slightly lower price. The homeowner is still ahead in
terms of the equity they have in their pocket and can move on and get
on with their life in their new home. It is important to focus on selling
your home not how much you can save.
How to determine the
price of your property
In order to determine the price of your property it is necessary
to compare your property to other homes that have sold in your neighbourhood.
There are three ways that this can be done:
1. Online valuation service
These services compile reports based on historic sales data for a
particular suburb or street. They are a useful overview and provide
information quickly and easily but provide fairly high level information
e.g. you may be able to find out the average house price in a street
but may not know how many bedrooms the average house has.
2. A professional valuer
A professional valuation is the most accurate way to find out how
much your property is worth. A valuation from a professional valuer
is not the same as a valuation that you might get from a real estate
agent. A professional valuer has no financial interest in your property
and is legally responsible for their valuation. Banks will require
a valuation from a professional valuer in order to issue a mortgage.
Banks will not accept a valuation from a real estate agent, as they
know that these are not reliable.
In order to value your home the valuer will visit the property to
make measurements and assess the condition. They will then consider
how your property compares to other properties that have sold in the
local area.
3. Comparative market analysis
It is possible to conduct your own market analysis by comparing your
home to others that have sold in the area. The key here is to compare
to the selling price of other properties and not the asking price.
Find 4-5 houses similar to yours that sold in your area over the last
6 months. Ask agents or owners or use property records to find out
what the properties listed and sold for. Keep an eye on newspaper
property pages for examples of recent sales.
As no two homes are exactly the same it will be necessary to make
adjustments for differences between your home and those in the comparison
e.g. if the home in the comparison has a renovated bathroom and your
property does not you will need to reduce the comparison price.
Setting the asking price for your property
It is difficult trying to subjectively value your home because of
the emotional attachment that you have. This can lead you to over
emphasise the property’s good points and to overlook any shortcomings.
In order to get the most accurate valuation we would recommend investing
in a professional valuation.
When setting the asking price it is important to remember that the
only thing that is relevant is how much a buyer is prepared to pay
for your home today. It does not matter how much you paid for your
home five years ago, nor does it matter how much your new home is
costing or how much you still owe on your mortgage. It is only your
property’s value as determined by the current real estate market
that is relevant.
You may however wish to include a small buffer to allow for some
negotiating room. 5% more on the asking price will give enough room
to negotiate but will not overprice the property so much that buyers
are scared away.
How to maximise your equity
In order to maximise the amount of money that you end up with in
your pocket we recommend using a professional valuer to determine
the property value.
Once you have decided how much to sell your property for listing
with a good FSBO website (also known as private sale) means you avoid
paying commission to a real estate agent and can maximise the amount
of equity you are left with.
Please visit our FSBO
/ private sale site to find out more.
