Very often, reality proves that things aren’t so simple – speed of selling and asking prices are usually mutually exclusive. An over-priced property will not receive as much attention from agents and buyers because they know the listing agent or the seller is “asking too much”. A quick search on the internet and newspaper classifieds will easily reveal the “market price” of a property. Even if there may be buyers who are emotionally attached to the property (reasons such as – used to live there during childhood, parents staying nearby), they are obviously not going to find the “attachment” if they don’t even bother to go view the property.
Either the seller needs to get realistic and reduce the price to market level or risk holding onto the investment going over peak of the property cycle and eventually having to sell off the property at a discount off what he initially could have received when prices were on the uptrend (when there could have been lots of interest for the property).
Many property agents dislike having to correct the price expectations of the home sellers because by agreeing to the seller’s price (even if it’s obviously going to be a record high price), agents will be able to get the exclusive listing from the seller more easily.
However, what home sellers don’t understand is this – if the property is not sold within the first 30 days, the number of interested buyers will reduce greatly (less buyers generally mean less interests, less competition and less probability of a high price). Buyers’ agents are not interested in bringing buyers to this property anymore. They simply won’t waste time recommending or showing the property to buyers, when they know the buyers will never match the asking price for this property.
So, if the seller’s agent is unable to get a price reduction from the seller, fact of the matter is, he is simply going to leave the property in the back of his “to-do” folder and concentrate time and resources on another property listing which is more reasonably priced. Meanwhile the exclusive agreement still continues and the seller is still paying the maintenance, mortgage, etc on the property.
Properly priced properties will ensure there’s maximum exposure and interests for the property and sellers get “the best price” possible, in the shortest time. Properties that are priced correctly will typically sell within 2 to 4 weeks of being listed.
Valuation is merely an indication of the possible value placed on this property. The price is what the buyers are willing to offer to secure ownership of the property. These are two very different concepts.
Only during a rising market, will buyers be happy to pay a premium over valuation. The competition from multiple interested parties will help sellers maintain an advantageous position and sell the property at a premium price to the “highest bidder”.
Property sellers should take advantage of the market cycle (uptrend) to secure a high price (not overprice) for their property. Missing out on the opportunity to capitalise on the market uptrend might turn out to be a costly mistake later. Studies have often shown that prices rise slower during uptrend but crash faster during downtrends. Once “the peak” is reached, or generally perceived to be reached, the only way is down and buyers will turn up (if they even turn up) offering ridiculous discounts off valuation. Holding onto the property investment to wait for the next uptrend in the cycle could mean a holding time period of 3 to 5 years. The smarter alternative would have been for the seller to cash out of this investment, lock in the profits, put the funds to use in other more liquid investments (with more stable & higher returns) whilst waiting for the next downtrend and ride on the market cycle once again (this time – with even more capital funds to invest).