Written by: Sr. KC Law, Principal & Valuer at Action Real Estate & Valuers
There are 2 aspects in selling that are almost akin to 2 pieces of puzzle that must complement one another- Property Value & Property Price.
Have you ever wondered at what price should you sell your property for? Pricing it too low, you will lose money; Pricing it too high, you will not be able to get a buyer.
There are generally 2 categories of owners pricing their property for sale:
Price it at above market price ( > property value)
Price it at market price or slightly below market price (= or < property value)
Which will receive more response from the market and work favorably towards the owners’ objective of selling his property?
Let’s evaluate and break down the possibilities of each option based on personal past experiences and market observation.
Price it at above market price (> property value)
a) Most knowledgeable buyers may bypass the property advertisement and look elsewhere. Hence we lose potential buyers who are ready to buy but are put off by an overpriced property advertised.
b) If we intentionally price it way above market price and say allow for price negotiation we may put across a message to the buyer that we are not sincere in selling the property.
It will only defeat the purpose of selling because serious buyers will not be interested to waste time negotiating a deal knowing it is above market price.
It may take 6 months, 1 year or longer for the price to drop to current market price level and genuine buyers will not have the patience to wait.
Most of the time serious buyers will move to other property with a more realistic or acceptable price.
c) It also takes too long to sell a property if it is overpriced in the current slow market.
It is also not uncommon to see properties which have been in the market for over a year and may have been marketed by many real estate agents.
The price will go down progressively from the time the property is first put up in the market for sale.
Instead of wasting valuable time testing the market with above market price and reducing it overtime, why not set the price right from the start instead of letting genuine buyers walk pass you.
Then there are also owners who hope for ignorant buyers who will buy their property at above market price, which rarely happens.
Even if there are such buyers, we may not be able to get passed the bank to value it at the escalated selling price.
If the buyer is not able to get the loan to purchase the property then how is the transaction going to proceed? The transaction will probably be aborted if the buyer needs bank financing.
d) Marketing a property too long a period of time is not only wasting a lot of time, it also creates an image to the prospective buyer that there must be something bad/wrong with that property, that is why for so long it’s still in the market and remains UNSOLD.
Price it at market price/slightly below market price ( = / < property value)
a) We will be able to attract genuine buyers to the properties.
b) There might be more than 1 interested buyer for the property.
c) Potentially selling slightly above market price if there are more than 1 offer.
d) If owners can differentiate creatively their property from other similar properties that are currently in the market with words like “best price, best value, best view and quiet surrounding etc.”, the property will have the best exposure and best credibility to the market.
e) Another reason why we should price property for sale competitively is so that it can even compete with an auction property in the same location.
Auction properties are usually listed 20% or more below market even for properties in good location and in great demand. Because the price is so attractive, it attracts a lot of bidders as many as 20 to 30 bidders. At the end of the day, the successful bidder usually ends up buying above market value, higher than secondary sale value in the same location.
f) Nowadays, prices of most properties are transparent to the public and most buyers are aware of approximately how much each type of property is worth by checking with property websites such as iProperty, Propertyguru etc. They can also check actual transacted prices in the Brickz website. Therefore, it is only wise to price the property correctly and competitively from the start before putting it up in the market for sale or to let.
P/S: The above advice is applicable in most cases. In certain circumstances, if the property has unique features and advantages from its extensive renovation compared to other similar properties around the area, it can be marketed with a higher premium.
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About the Author
Sr. KC Law is a Registered Valuer, Estate Agent and Property Manager with The Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVEAP) of Malaysia. KC Law is also an electronic engineer registered with the Board of Engineer Malaysia (BEM) and received his engineering training from Tunku Abdul Rahman College Malaysia and later at Hatfield Polytechnic United Kingdom. In the 1990’s he was involved with the digital transformation of Telecommunication infrastructure for Maxis and Telekom Malaysia. His passion for Real Estate in the 2000s led him to practice as a real estate negotiator in Ace Realty and later valuation and property management in Rahim & Co International. Several years later he founded Action Real Estate and Action Valuers & Property Consultants. His areas of expertise are in Real Estate Agency, Property Valuation, Property Management and Business Valuation. He is Member of The International Association of Certified Valuation Specialists of Canada, Member of Royal Institution of Surveyor Malaysia and Member of Malaysia Institute of Estate Agents.