Price your property right

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Avoiding the pitfalls of overpricing, getting the best property price.

PRETORIA: Property owners often complain that agents undervalue their property for a quick sale, but overpricing a property can be a bigger mistake. If you want to attract a fair offer for your property, price it right, especially during tough times.

"Too often people want to pay their kids' college tuition and retire on the proceeds of their property," says RealNet Silver Estates owner Yolanda Pelser. She is joking, but only just. She stresses that people tend to overprice property when they first offer it to the market and exacerbate the problem by signing lengthy sole mandates with agents.

"By signing a year mandate with an agent, you are not raising the price of your property, you are driving the market down." She explains that "during a sole mandate owners are excluding other offers on their properties, so there will be few if any bids from different potential buyers." This raises the chances of a property becoming stigmatized and a "non-seller".

Yolanda believes sole mandates should be no more than three months. She offers a controversial alternative: "By pricing a property at the bottom range of your expectations you are more likely to sell quickly and for a higher-than-expected price." I pointed out that this is exactly what creates the perception that agents pressure clients to lower prices so they can make a quick buck.

"Not at all," she replied. "Think about it this way. If a good property enters the market at a fair price without a mandate, people normally jump at the opportunity to buy a bargain. There is often an agent feeding frenzy with a property like that, which means there will be more interested buyers and most likely more than one offer. This starts a bidding process which drives up the price of the property."

Yolanda adds that this is also the ideal scenario in which to drive down commissions. "When agents know a property will be a quick seller, they are more certain of making money on the deal and will be more willing to lower their commission, so as not to lose the opportunity."

Pricing a property is not always easy. Not all properties in the same suburb are equal. Some owners spare no expense in finishes and other improvements to the structure, while others may have the advantage in square meters, but have seriously skimped on aesthetics and maintenance.

Whether you are buying or selling you should do some homework beforehand. Suburb reports are a good way to get a general idea of selling prices in an area.

"You should determine the land value of your property and then the replacement cost of the buildings you have," says Yolanda. "By comparing similar building materials, tiles, finishes etc. this should give you a good idea of what the building cost per square meter should be today."

Council rates and taxes evaluations on properties - in most cases - are a fair estimation of their base-value and this information is available from local municipalities. Gardens also sell homes and cost a great deal of money to establish.

Yolanda's final tip is for sellers: "Too often agents discourage people from making offers that don't meet the asking price, but one shouldn't decide for the seller. For a number of reasons sellers may be willing to settle for less." Write to: news@realestateweb.co.za

Subscribe to the Realestateweb newsletter before the end of November and you will qualify for a special introductory discount of R25 for first-time users of our automated property valuation reports - including suburb reports. A special voucher number will be delivered to the inboxes of all Realestateweb newsletter subscribers, for exchange on a property valuation report accessed through www.realestateweb.co.za (click here) before 1 December.

Got any tips for getting the pricing of a property right? Share them, below this article.