Investors should be wary of overpricing

By webmaster 21 December 2011 | 1 minute read

Investors need to be aware of fixed ‘overpricing’ on properties, with the majority of sellers adding a buffer on the correct price, the head of a franchise group has claimed.

Setting a fixed price for a property, one that’s usually inflated by up to 10 per cent, must be avoided if agents and investors are serious about generating strong interest from potential buyers.

“The days of estimating a likely selling price then adding five to 10 per cent buffer on for negotiation are over, if we are serious about doing the right thing for the seller and ensuring every opportunity to maximise viewings, competition, offers and the best sale price,” said RE/MAX WA regional owner, Geoff Baldwin.

“The past five years and particularly the past 18 months have seen our market evolve and become much more sophisticated with more agents and sellers recognising that a completely different approach is required to gain optimum results”, Mr Baldwin said.

“It’s a fact that the majority of sellers add a buffer onto what they think they can achieve to factor in room for negotiation and this results in a listing that is overpriced in a market where qualified buyers are still well and truly outnumbered by stock on the market.

“On the other hand, buyers invariably start looking well below what they eventually pay, because the last few years have conditioned them to think that they will get a bargain and it’s not until they’ve seen many properties that they eventually lift the budget.”

Getting the initial pricing right is critical, he added, as it's usually in the early stages of a listing when the property gains most interest.

"However, if it doesn’t attract offers it [goes stale] and the end result is a lower offer or no offer at all,” Mr Baldwin said.

His view is supported by multi-award winning real estate principal Peter Sissons, managing director at Brisbane-based Sissons Real Estate.

While the initial negotiation with the vendor can be tough, Mr Sissons said "I have found that providing a seller with an accurate opinion of current market value - this allowing them to make an educated decision as to whether they will sell or not - has in our case led to an average conversion rate of listings to settled sales in excess of 90 per cent per annum".

Mr Baldwin said the best way to avoid overpricing is to avoid using a fixed asking price altogether.

“There are several alternatives to fixed price that are proving to be extremely successful in the current market, conditions including auction and buyer feedback ranging which both avoid fixed prices, maximise enquiry, viewings and competition.

“Although properties may not sell under the hammer at auction, when assessed as a multi week campaign where offers are considered before and after auction day, the results are almost 100 percent better than fixed asking price.”

Investors should be wary of overpricing
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