How to lose up to 45% on your asking price
Many sellers of homes remain rooted in a world of yesterday and believe their homes are worth far more than actual comparable sales which are taking place in the current marketplace and being registered in the deeds offices around the country.
Sellers whose homes remain unsold for up to 12 months are, on average, priced at some 33.7% higher than the valuations provided by registered professional valuers used by the major mortgage banks in South Africa. This is according to research from HomeBid, SA’s largest low commission estate agency, which uses these valuers to assess the market price of homes to be listed on HomeBid, and the various property portals.
The research found that, from a sample of 58 sellers that HomeBid opted not to represent due to their unrealistic asking price, that only 13 sales, or 23% of the sellers, managed to sell their overpriced homes within 12 months. However, due to their unrealistic asking price, they eventually received and accepted offers at 11.8% below the valuation assessed by the valuers. This means they received, on average, 45% below their inflated original asking price.*
The longer an overpriced home is on the market the further the price drops upon a sale as evidenced by this research. This is equated to a very simple but accurate analogy. If a doughnut is priced at R2 and does not sell after the first day you mark it down to R1,80, and so on for the next four days. If by the fifth day it hasn’t sold you can mark it down to 20c but it still won’t sell because it is stale. This is exactly the same as an overpriced property; it eventually becomes stale in the marketplace.
The remaining unsold 45 homes of the research sample, as attested to by an inspection of deeds office transfers over the past 12 months, shows that the valuers average price was R1,515m whereas the asking price of the homes by the sellers was an average of R2,025m, a variance of 33.7%.
“What a seller must realise is that the valuers working for the banks assess a value of the home and their buyer will only get a mortgage bond based on that valuation. If the seller asks a higher price than the valuation, their buyer will be required to put down a much higher deposit and most buyers don’t have these funds available. Therefore no sale takes place,” explains Cavan Sheahan, GM of HomeBid.
Valuers spend all day assessing home prices and they each do hundreds of valuations a year. Valuations are based on fact and historical as well as current market trends are taken into account. They are not influenced by the emotions of the homeowner believing that somehow their home is worth more than the ruling price in the neighbourhood.
However, valuers are not perfect and from the HomeBid valuers research, three of the 13 homes sold, or 23.1% of the sample, were sold at an average higher price of 14.2% than the valuations; whereas 10 homes (76.9%) were sold at a lower price of 11.8% below the valuations. This is likely because of the length of time these overpriced homes stayed on the market.
“If a seller is serious about selling, then accepting a registered professional valuer’s valuation of their home, as arranged and paid for by HomeBid, is the first step to a successful sale of their home at the current market price,” concludes Sheahan.
*Once HomeBid had received the valuations of these 58 overpriced homes it opted to not list the homes. However, to ensure the accuracy of HomeBid’s valuers, it continually tracks the performance of the valuers against sales and transfers in the deeds office. The 58 homes research sample comes from that analysis and tracking at a national level.
Author: Neville Berkowitz