How homesellers lose thousands.
by Neil Jenman
Article written and provided by Neil Jenman from Jenman.com.au . To see the original source of this article please click here. https://jenman.com.au/the-asking-price-trap/. Neil Jenman is Australia’s trusted consumer crusader. He can support you, all the way, from choosing an agent who will get you the highest price guaranteed to when your removalist comes! You get an unprecedented level of total support. All for free. To find out more visit jenman.com.au
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When it comes to the value of our homes, most of us are hugely optimistic. Our place is better than next door. It’s got better features; it’s better built and, of course, it’s in a better location.
So, it’s only to be expected that, when it comes time to sell, we’ll want more money than the place next door. And more than the house up the road.
Our house is better.
Get it? Better, better, best.
If we can’t find an agent who’ll agree that our home should sell for the best price, we’ll find another agent. No matter how many agents we interview, we will keep looking until we find one with the intelligence to agree with us about the value of our home.
All home-owners want the best price for their homes when they sell – and then some. Nothing wrong with this, you might think. Aren’t we entitled to the best price?
Well yes, that’s correct. The trouble is, however, that by placing too high a price on their homes, many sellers lose out on thousands of dollars.
It’s a well-known real estate truth: If you start too high (at an impossible-to-achieve price), one thing is almost certain: You’ll finish too low.
Here’s what is happening with thousands of homes for sale these days: A property is offered for sale at a price well above its true value. Consequently, buyers who should see it never see it. Eventually, it sells for less than it could have sold if the price had been more realistic in the beginning.
For example, let’s say the true value of a property is around $900,000. Most owners tend to over-price their properties by at least 20 per cent, often much more. A $900,000 property could be placed on the market for well over $1 million, perhaps as much as $1.25 million.
Please don’t think hiding the price – or choosing to sell by auction – means you’ll be able to disguise that your home is over-priced. Auctions are always the worst way to get the best price. And don’t allow an agent to use a “price from” or a bait-price; all that does is attract buyers determined to pay you less for your home.
So, how do you stop buyers ignoring your home if you price it too high or offering you too little if you price it too low or choose auction?
Please understand: Modern property buyers are highly informed. These days, buyers shop around like never before, they spend hours on-line; they soon know the true values. Most can spot an over-priced property in a couple of mouse clicks.
Buyers laugh contemptuously at over-priced properties. And guess what this means? Hardly anyone buys such properties. Not when they are massively over-priced.
And then, a few weeks later, when concerned sellers start to realise that buyers don’t share their inflated opinion of their home, it’s too late. The damage is done. The property has been on the market for too long, it is now stale and buyers, generally, are wondering what is wrong with it.
Now, instead of reducing the asking price to its former true value of, say, $900,000, the sellers may find themselves forced to reduce the price even lower to attract a serious buyer. Consequently, a home that could have sold for around $950,000 may often sell for closer to $850,000 (or lower) – and all because the owners priced it too high at the start.
A study (conducted in the United States) in around 2009 revealed that, when most home-owners think of the value of their own homes, they are “bordering on delusional”. This delusion factor is like a huge price trap that does so much financial damage to so many of us when we sell our homes.
It is a fact: The longer a home is on the market, the lower the price it will achieve on sale. Over-priced homes can sit on the market for weeks on end. Sometimes months. And the sellers often have no idea of the damage being done to their home’s value.
First, the buyers ignore them and then, second, the buyers laugh at them.
Yes, over-priced properties often become under-priced sales.
So, if you’re selling your property don’t fall for the common Price Delusion Trap. Price it right and get the best price for it.
Sure, you can ask slightly more and yes, you can expect a lot more. And good agents can always get a bit extra. Further, if you are lucky enough to find an agent who’s also a skilled negotiator you may indeed get a whole lot more.
Scott Kim is a sales agent with TG Newton, one of Melbourne’s oldest and most respected real estate firms. Scott is one of the best in Australia when it comes to negotiation skills. He gets sensational prices for properties. Recently, a seller asked us if Scott could sell a home in Essendon for $3.5 million. It’s on a huge block (half an acre in old terms) and local agents have been quoting around $2.1 million. We gently pointed out that Scott is a real estate agent, albeit a great one, but he is not a magician. Even magicians struggle to get delusional prices.
So, how do you know the right price to ask?
Consider getting a registered valuation. It could be a few hundred dollars well spent.
And, second, when you are speaking to agents, urge them to tell you the truth. Say to the agent, “What’s the minimum price you feel my home will fetch? Is there a price below which you will agree not to be paid a fee?” This will let the agent know you are a serious seller who is not interested in being fed a delusional price to try and win your business.
There will rarely be more buyers for your home than when you first place it for sale. Homes that are fresh on the market always attract the most interest. That’s usually that buyers pay the highest price. It’s not the time to turn buyers away with a delusional price that will cause your property to be rejected and, later, to perhaps becoming the laughing-stock of the area.
As hard as it may be to accept, you can be sure of one thing when pricing your property to sell: inflated asking prices almost always lead to deflated selling prices.
Price your property at the right price. And then sell it for the highest and best price.