Why Setting the Right Asking Price for Your Property Is So Important
If there is one area of real estate sales that consumes the thoughts of nearly every vendor I’ve ever worked with, it’s setting the right asking price for their property. Every vendor has their own goals they’d like to achieve, as I’m sure you do, too, but they also want to move onto the next chapter of their lives as quickly as possible, and that’s what makes setting the right asking price a bit of a balancing act.
In my video on pricing from my series of educational videos on buying and selling property, I make the comment that in order to set the right price, you need to be able to strike a balance between setting the price too low and attracting lots of buyers, and setting the price too high and attracting very few, or no buyers at all.
And while it may be tempting to price your property on the low end of the scale and hope that, once you’ve attracted a respectable number of buyers, you can then set your reserve and the opening bid at a price more in line with your goals, it’s important to remember that the New South Wales government has just introduced new underquoting laws to quash this very practice. These underquoting laws carry pretty stiff penalties if you’re found setting prices deliberately or misleadingly low.
Wear Your ‘Buyer’ Hat
So then, the only real option you have is to find that sweet spot I mentioned earlier. To do that, I think it’s best if you step out of your shoes as a vendor and put yourself into the shoes of the prospective buyers, which, most of time, many vendors are anyway, as they’re usually selling one home to buy another. You need to be able to look at your home objectively; to be able to see its flaws just as easily as you can its selling points. Try thinking back to when you were first buying the property. What attracted you to it and what were the drawbacks you pointed out during negotiations? This is how a buyer will view your home.
Now that you’re in that mindset, you’re in a better position to price your property realistically, while still keeping your goal price in mind. Again, remember that buyers really aren’t interested in how much you need to get or would like to get for your property. They’re only interested in getting value for money.
Meeting in the Middle
Nearly every real estate agent will take the same steps toward setting the right price for your property that both reflects your goal price and what they estimate is the true market value for the property. That being said, not every real estate agent will necessarily come up with the same figure.
Be wary of agents who quote you a price significantly higher than the other agents you’ve spoken with. This is typically just a ploy to get your business and it’s not likely you’ll end up walking away with that price for your home.
Each agent you speak with will draw on their own competitive market analysis to reach the figure they quote you. This analysis is usually based on their recent sales, or the recent sales of properties like yours, in your local area. An agent familiar with your area, because they happen to be an area specialist there, is probably more likely to give you a price more in tune with the market conditions than an out of area agent.
When the Price is Right
Aside from avoiding hefty fines if you’re found to be underquoting, the main benefit of spending the time to find and set a price that reflects the current market conditions, is that it reduces the amount of time your property will spend on the market, which in turn makes you more likely to achieve a better outcome and a higher price in the long run anyway.
The very first stages of a sales campaign is when your property will generate the most interest, and even more so, it’s when you will see the majority of your most qualified, motivated buyers. These are the buyers you want making offers, taking out contracts and bidding on your property.
Beyond those first few weeks, the next batch of buyers aren’t as motivated, either because the property is out of their price range anyway, or because they’re still not certain as to what they’re looking for. It’s true that these buyers do sometimes fall in love with a property and end up buying it, but rarely is this the case for a home priced incorrectly.
Diligence Pays Off
If you price too high and your property subsequently sits on the market for a long time until it goes stale, prospective buyers will take the opinion that there must be something wrong with the property. This drives down the value of your property — possibly well below what its true market value is — and you’ll probably score only low ball offers from vendors hoping to secure a bargain.
Be diligent about setting the right asking price for your home. As I said earlier, avoid agents who quote you a price well above every other agent, but also be wary of what could be considered underquoting. Do your own research and review the properties your agent has used as a benchmark for the asking price of your home.
Setting the right asking price is something I discuss in my educational video series on buying and selling property, which you can view by subscribing to receive access to them. Alternatively, you can request a proposal from me if you would like me to provide you with an obligation-free appraisal of your home. I specialise in selling properties in Sydney’s Lower North Shore, encompassing Cammeray, North Sydney, Naremburn, Crows Nest, Neutral Bay, Cremorne and Mosman.