4 Steps to Properly Price Your Property
If you incorrectly price your home then it might languish on the market for a long time. The price you list your home for will be a major determinant towards how long your property takes to sell. Striking the perfect balance between the price and the sale timing is one of the greatest challenges for property sellers.
Circumstances where sellers can incorrectly price their home include:
- The owners want to receive more than they owe on the property
- They consider the pricing with regard to other homes along the same street and feel theirs should go for more
- The seller considers similar homes at other locations and/or
- The price is higher than it was valued the previous year.
Ascertain your home’s current market value as accurately as possible since the fact of the matter is buyers are only prepared to pay today’s market value for your home.
The two major factors that influence property prices are:
- Rental Demand when more people want to rent in your suburb than there are available properties for rent. This not only drives rental prices up, but also property prices because they can command more rent for their owners.
- Supply and demand, sales demand goes up when there is high demand for your area and your type of property and less properties available for sale. There are likely to be more buyers than sellers in that case and hence a high sales demand which in turn drives prices up and vice versa.
You need to accurately determine both and to do so you need to do thorough research of the market conditions of your suburb. The newspaper or real estate listed prices might mislead you since they do not offer you all the information you need to set a proper price. Usually they contain only 20% of the information you need to price your home for the best result. The prices might not be accurate and you end up falling into the same hole of mispricing.
Here are four steps you should be taking to determine the best price for your property to optimise market attraction:
1. Research Sales Demand
Use a variety of data sources to accurately determine the market conditions of your suburb:
- My RP Data myrpdata.com.au is part of the ‘RP Data’ company but tailored for the public. This site provides many similar reports to APM (Australian Property Monitors), but also integrates maps for a view of your area when pricing comparable properties.
- Local and Regional newspapers real estate section listing all the recent sales results for the area or suburb. This up-to-the-minute data can take up to three months to reflect in official databanks, many of which require payment to access, and is of great value.
- Australian Property Monitors (apm.com.au) features a ‘Home Price Guide’ for sellers. You can view price history by street, the postcodes, current price estimates, a 10-year price trend, and even a price forecast for your property.
Research a number of properties in the market that are quite similar to yours in terms of location, features and presentation. Take interest in:
- Their pricing now
- The price when they first listed
- Their duration on the market
- What interest levels the buyers have and what offers, if any, have been made and
- The marketing strategy used
If you need more information, you could call the real estate agents in charge of the homes for more information and even take time to inspect some of the homes.
2. Research Rental Demand
Rental vacancy rates for a suburb or area are what indicate how much demand there is in an area. However, its best to do your own research and data analysis before settling on your selling price.
Rental demand can impact on property prices within your area:
- High demand means properties are rented-out within a week. With greater competition for a property type, the higher the price people are willing-to-pay for it. Your property can be priced high.
- Medium demand means properties rented-out within four weeks. You can expect a timely sale if you list your property at market value. This means the price has to be just right for your property type.
- Low demand means properties take more than four weeks to rent-out. You risk your property sitting on the market for a long time if you price it even slightly above market value. Properties in low-rental demand areas usually list slightly below market value to attract more people.
To get more information, you can call three real estate offices in your area to enquire about the availability of rentals and demand for your property type. The data you gather will indicate where your property pricing should be and provide a starting point for talking marketing with your agent. It’s ideal to price your home within 10% of its market value as indicated by the rental demand data.
3. Seek Advice
After doing your own research on sales and rental demand and your properties market value it’s advisable to check in with someone who has real estate experience to sound out their independent valuation of your home. Consider opinions alongside suggestions for property value enhancements to increase value.
If using an agent, ask them to complete a comparative market analysis (CMA) for your property and indicate the price range where they believe the property falls. Encourage them to back up their data with evidence to be on the safe side.
4. Make a Decision
Ultimately your sale price is up to you. You alone decide the price you want to go to market with. Consider the results of your research and the professional advice given. If you choose to ignore these findings in favor of setting your ideal price and hoping for the best basing your price on luck, you risk losing money and time before you make a sale.
Factors that contribute to losing time and money include:
- A freshly marketed property attracts peak interest and it is at this stage you take advantage and with the right pricing make a quick sale.
- If your price is unreasonable from the outset, you scare buyers away and waste significant marketing dollars and your property takes more time in the market at the risk of losing value.
- If you miss out on a sale the first time, you will most likely need to reduce your price, and spend more time and money on marketing to make buyers aware of this.
There are buyers eagerly waiting to own a property just like yours right now and for the right price, if your price reflects today’s fair market value, you can expect competition for your home. So, if your house is priced at the right market value, you need to add as extra value to it as you can just to give it the upper hand over the competition. If priced more than 10% above market value, the majority of buyers are likely to pass it by, fearful of paying too much.
Eventually your home will sell but after buyers exhaust all other cheaper options or feel the urgency and competition to do so. The trick is to sell your property as quickly as possible since similar properties at more affordable prices come up for sale, there is a real risk your property will sit on the market for a very long time.
Selling Property Tips
- Why you should know the value of your home.
- Using an agent vs selling your property yourself.
- How to find a good real estate agent.
- Expect your agent to ask these questions.
- Advantage of Exclusive Listing.
- Auction vs Private Treaty.
- Increase your property’s value on a shoestring.
- 5 Tips when selling.
- 4 Steps to properly price your property.
- Be prepared for “Why are you selling?”.
- Why aren’t you getting offers.
- When should I consider dropping the price.
- 5 Considerations before downsizing.
- Preparing your home for professional photography.
- Marketing Essentials for Selling your home.
- 13 items home inspections should cover.