In the current residential property market "Price discomfort" is the norm
Category Blog
In the prevailing climate of negative growth in house prices (in real terms), home sales are almost invariably being settled at a price level of discomfort for both seller and buyer.
Today's digital age of instant access to information ensures that buyers and sellers alike are aware of prevailing home values. They are au fait with market trends and lifestyle attractions - or detractions - of the neighbourhoods in which they wish to buy or sell.
Inevitably, buyers will believe they can secure bargains. Sellers, on the other hand, have inflated expectations. As a result, deals are often struck at prices that are uncomfortable for both parties.
For example...
A typical transaction would play out as follows:
Sellers feel they know the true market value of the property but will up the asking price by 10% or so. The buyers on the other hand, are generally far more realistic about the market value (as they carry the risk) and will pitch the offer at less than but close to the market value. They have generally done a lot more homework.
Sellers can be more than 20% adrift of the current market price.
The difference between the two prices is finally eroded by negotiation to a point of settlement at which neither feels 100% happy.
A better strategy for sellers is to advertise at their lowest price possible and hold the line. The property will appear favourable compared to other similar properties. Avoid "dropdown" price marketing.
Sellers who persist in adopting a "dropdown" strategy - inflating the asking price and then negotiating down to the price desired - may just as well put a 'not for sale' sign on the pavement.
It simply does not work - particularly in current market conditions, and most definitely not at the luxury end. Buyers of prime property are well informed. They have access to market indicators and other data. They know true value when they see it, and will pay the current market price if they like what they see.
At worst, it is a strategy that could, in fact, cause the property to be sold below its true market value.
To quote Mr Eskel Jawitz, a legendary real estate agent principal.. "To push against the market trend is like pushing against the sea"
Author: Ronald Ennik
