01 Sep Are you pricing your property right?
There are many factors that determine the successful sale of a resale property. Pricing the property right is one of the most important factors that the seller and his appointed property agent need to get right.
The property market moves in up and down cycles. At any point in time, there is always a fair market value for any property. This fair market value is the price that genuine buyers (who want to buy NOW) out there would be prepared to pay at this point of time.
My first task as a seller's property agent is to inspect the property. This is followed by assessing how a genuine buyer interested in the property would be making his or her buying decision and how much this buyer would be prepared to pay for the property at that particular point in time.
This fair market value is based on market factors and the property’s attributes. A majority of these factors and attributes are beyond the seller’s control and cannot be altered. Example of market factors include, government policies, demand for housing/investment, housing supply for sale, competition, transacted prices & volume etc. Attributes would include age of property, level, condition, view, size, tenure, facilities and accessibility etc. In the case of landed houses, various aspects of the land would have to be taken into consideration.
Knowledge Is Power
Before I decide whether to take on the sale of any property, I always start by doing a detailed study of the property and the neighbourhood. Through the course of my work, I have had the privilege to see many different properties and talk to many different people. My interaction with buyers, sellers, tenants, landlords, fellow property agents and researchers form a valuable source of knowledge that I tap on. This, together with my own analysis and understanding of the market, helps me determine what the fair market value of a property is.
Most sellers have their own set of fair market value when they want to sell their properties but many a time, the sellers’ reasoning for why their properties are worth a certain value is flawed. Usually in such cases, there is a common disregard for market factors and they end up having to learn things the hard way in a slow market.
Back in 2013, I visited a beautifully renovated unit that was in an almost pristine condition. At that time, the market was in the early stage of reacting to TDSR which affects how much a buyer can borrow. The owner wanted to sell the property at $2.4m because he had sunk in a lot of money to do up his place and the bank had valued it at the same price. I totally agreed with him that the apartment looked really good. I then analysed the situation with him and told him that in a very best case scenario, the offer would come in between $2.1m to $2.2m. He decided not to engage me and got another property agent to help him get his $2.4m.
Seven months later, he contacted me again. During those seven months, he used a mix of property agents and auction houses and had a grand total of 3 viewings with 0 offer. This time round he told me he would do whatever I think was correct and wanted me to handle the sale for him. I told him that even though it had only been seven months since we last spoke, the market had shifted and we could only list it at max $2m. I told him to be mentally prepared that the final offer would be much lower and changed the marketing approach. The property was eventually sold at $1.87m. The simple truth is the property would have fetched much higher if it was priced correctly at the point when I was first contacted.
In a slow market that is trending down, the later you sell (genuine sellers who need to sell within the next few months), the greater the possibility of selling at a lower price in the end. As the property market trends down over time, the serious sellers would constantly be adjusting their prices down. However, in many cases, the adjusted price is usually still above the property’s dropping fair market value. So it becomes a case of constantly pricing their properties above the fair market value (that is trending down) and hoping that a buyer will buy. This is the painful truth and situations like the above are always happening. This is either because the sellers were ill-advised (or had no advice) by the property agents helping them or the sellers did not accept their reasoning and appointed property agents who simply “followed instructions”.
Are you pricing your property correctly or are you like the other misinformed sellers, always pricing your property above fair market value in hope? Is your property agent giving your the right advice?
Does it then mean that all properties that hit the market will fetch lower prices in a slow market? The answer is no. There will always be exceptional properties that are in excellent locations, have excellent attributes and are rarely available for sale. Such properties will always be in great demand and will fetch excellent prices even in a slow market. In fact I just sold one such property recently at a record price that is higher than what the sellers wanted. How to know if your property is one such property? Talk to me.
The valuation given by banks is not the gospel truth – in reality, the actual fair market value could be a lot higher or a lot lower depending on many different factors. Getting the price right is just the first step towards the successful sale of any property. Other aspects like marketing, property presentation and negotiation must also be executed well to achieve the desired outcome.