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The Risks of Overpricing

We see it all the time. Properties come onto the market, at what an agent or an owner thinks it is worth. An asking price or strategy is set.

SCENARIO ONE: The market thinks it is a little high; it sits there a long time. Either the price comes down, or worse, doesn't and as time rolls on the perception is that the property is overpriced. WHY? Hard to argue with the logic, “if it were good value it would have sold by now".

SCENARIO TWO: The agent presents a number of offers to the seller in the marketing campaign, often a "cluster" all around the same sort of figure and often less than what the expectations of the seller are, but appear to be at around "market value".

The seller may reject or counter them, and no sale occurs. Many months later the property ends up selling for far less than the early offers, sometimes with the first agent, often with a second agent. We see it all the time.

MYTH:
Many owners believe offers usually go up over time. In a rising market that may be true. In declining or flat markets, usually the opposite is true. Hence I recommend only coming into the market if;

  • You are definitely wanting to move and are committed to the process
  • Testing the market usually damages the value of a property. Serious buyers reject it, and soon the property develops a reputation among buyers and other agents as being "not really for sale".

There are enormous risks with coming onto the market too high, and due to the biggest fear of sellers, that being of underselling, the dice is rolled in an attempt to fetch a premium. That premium is almost always achieved in the period when the property is "fresh" to the market, and usually only if the initial asking price is an attractive level for buyers, who are looking for value.

Hence it is critical to get the following right as we do not get a second change of setting a first impression.

      I.            First class marketing is not negotiable. Every single quality branded product is accompanied by first class marketing, from a Mercedes, to a Rolex, to fashion. To do otherwise is false economy.

     II.            A professional expert agent to represent you

    III.            Quality staging and presentation if required to make your property stand out

    IV.            The correct pricing strategy appropriate for your property

     V.            A thorough understanding of "absorption rate" and "market segments" appropriate for your property

    VI.            Understanding of the "benchmarks" appropriate for your property

   VII.            An independent objective assessment about what the true current fair market value is

a.      That is not the same as an agent appraisal

b.      That is not the same as replacement value

c.       That is not the same as what you paid for it plus your costs

SOLUTION

       I.            Choose an agent like you would any professional lawyer, accountant or doctor, based on track record, references, trust, ability to deliver you the right outcome. In short appoint a master practitioner.

      II.            Determine yourself what the "real value" of the property is before coming onto the market

     III.            Appoint and take advice from your agent, trust that agent.  Work with them.

     IV.            Decide a strategy to make sure your property gets maximum exposure in the first 3-6 weeks. This is the critical period, in any market. All of the best buyers have seen your property by that time.

      V.            Be open minded to listen to what the market says about your property.

     VI.            Work with serious early offers, they might be the best you ever see. A well presented, well priced property should generate multiple offers (but not always) in the initial marketing period.

For an explanation of any of the terms above, please feel free to call me for a thorough assessment of your own property, or property information generally. 

Thank you and see you in the market place.

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