The Importance of Pricing Your Home Correctly the First Time
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How a strategic asking price can lead to a quicker sale and a better final offer
When placing a property on the market, many homeowners naturally want to secure the highest possible price. Yet accurate pricing - or the lack thereof - can dramatically affect how quickly your home sells, how much interest it attracts and the final amount you can expect to see on the sale agreement.
With today's wealth of online resources, buyers are more informed than ever, equipped with data on local sales and comparable listings. As a result, establishing a realistic price at the outset can decide whether your home sells swiftly and profitably, or sits on the market until distressing cuts become inevitable. It's worth noting, however, that software offering instant valuations often relies on average figures of recent sales. Extreme high or low values can skew these estimates and certain local nuances may go overlooked. This makes a more holistic approach essential - using online valuation data as just one source while also factoring in property condition, neighbourhood specifics and market demand.
The following paragraphs highlight why it's so important to set a sensible figure from day one and offer guidance on appealing to buyers while safeguarding your investment.
The Cardinal Rule
Being asked by a Property Practitioner what value you want to achieve is often a red flag: the agent is more likely to offer to use that value, even as a starting point, to achieve a mandate for their agency. At Hamilton's Property Portfolio we actively avoid this practice and focus on providing a realistic Comparative Market Analysis which will allow us to list and sell your property more efficiently. Ultimately, we are doing both yourselves and our agency an injustice by incorrectly marketing your property at an inaccurate value. When properties are priced correctly, we consistently achieve within 5% of the asking price.
Why Pricing Correctly Matters
The first couple of weeks a home is on the market are often referred to as the 'golden window' - a time when interested buyers are most alert to new listings. If the price is set too high, those same buyers might avoid viewing the property, assuming the seller is inflexible or unrealistic. Even a subsequent price drop might not entice or reignite the initial excitement you would have captured with a more accurate price.
Another crucial factor is the phenomenon known as 'market burn.' When a property lingers on the market longer than average, it risks becoming over exposed or stigmatised. Buyers may wonder why nobody else has snapped it up, leading to doubts about hidden flaws or an overly ambitious asking price. Repeated price cuts often reinforce such doubts and buyers might start bargaining aggressively, leaving the seller somewhat "over-a-barrel".
Pricing also carries a financial toll if done incorrectly. Each extra month spent on the market incurs ongoing costs such as bond, insurance, maintenance and council tax. Meanwhile, juggling two bonds (if you have already purchased a new property) can be stressful and expensive. Setting a realistic price can minimise this financial and emotional burden by attracting serious viewers and more decisive offers early on.
Real-World Example: The Impact of Overpricing
The following illustration of how pricing shapes a property's fate, is one that every experienced estate agent can attest to having experienced - often! Imagine two similar homes in the same neighbourhood, listed around the same weekend. Both properties share comparable sizing, finishes, features and appeal, but they are priced differently:
- Home A is listed at a figure closely aligned with other recent sales in the area. Because this price reflects market realities, buyers schedule viewings almost immediately and competing offers soon emerge. The home sells within a reasonable period. Home B, though slightly larger, starts off with a higher and arguably inflated price. Buyers pass it over in favour of better value homes. By the time the seller decides to lower the price, the initial burst of interest has faded. After multiple drops, it finally sells for less than what Home A achieved, despite offering greater value. .
This example highlights the real cost of overpricing. While testing the market with a high figure may seem tempting, the risk is that genuine buyers dismiss the listing from the start. Once the price is lowered, the most motivated buyers have often moved on.
Key Strategies for Determining the Right Price
Comparative Market Analysis (CMA)
A thorough CMA typically involves examining recent sales of similar properties in the same area. Factors such as location, size, layout and condition form the foundation for an evidence-based price range. Although it's not an exact science, a well-executed CMA reduces guesswork and helps you strike the delicate balance between appealing to buyers and securing the best possible outcome. Skilled area specialists are likely to provide the most accurate information.
Professional Appraisals
Another valuable step is to invest in a professional appraisal. A qualified valuer will inspect your property, assessing any unique selling points, structural components and broader market trends. Professional valuations cost money, but they can prevent costly mispricing mistakes, potentially saving you time and stress in the long run.
At Hamilton's we frequently collaborate with valuers from a number of financial institutions to ensure the accuracy of their valuations.
Online Valuation Tools
These digital tools can be helpful as a starting point for sellers, offering approximate figures based on local sales data and property size. Because they primarily rely on standardised data sets, online valuations tend to work best for Sectional Title guidelines, especially where data such as accurate square meterage under roof is provided. When it comes to freehold properties, however, the results may be less reliable. Most algorithms only factor in the square meterage of the land, disregarding various other essential elements - such as size of the dwelling under roof, unique features, recent improvements and the property's precise condition. While these estimates can serve as an initial reference, rely on them cautiously and combine their findings with human expertise for a more accurate assessment..
Staying Informed About Local Market Trends
Keeping track of how long properties in your area remain on the market and at what prices they ultimately sell, is invaluable for setting realistic expectations. Keeping in mind that as a seller, all you are exposed to is the asking price of a property, for example, on Property24 - as opposed to the price it eventually achieves. In a strong seller's market, there may be slightly more leeway to aim higher, whereas a buyer's market might require a more competitive listing price to generate interest.
Common Misconceptions About Overpricing
Despite clear evidence to the contrary, some sellers still believe that starting high is the best strategy. Here are a few myths:
- "I'll just reduce it later if I don't get interest."
It is true you can lower the price, but that initial period of buzz is usually your best opportunity to secure a strong offer. Each reduction also risks sending a message of desperation.
- "Buyers expect to negotiate, so I need room for them to haggle."
While some negotiation is typical, an obviously inflated asking price can dissuade serious buyers from making any enquiries and even viewing the property. .
- "This property is unique. Surely someone will pay a premium."
Unique features can certainly draw interest, but they can also reduce the size of the potential buyer pool by appealing to a narrower audience. Although distinctive elements may justify a higher asking price in theory, actual market value is still influenced by recent comparable sales and how the property measures up against other options. Moreover, someone seeing the home for the first time is unlikely to share the same attachment you have, having lived with what you perceive as special features.
- "Buyers don't have the data to recognise overpricing."
In an age where online portals and records are accessible at the click of a button, it's never been easier for buyers to verify what is fair and what is not.
Frequently Asked Questions
How do I determine my home's market value?
Start by researching recent local sales of similar properties to get a general benchmark. A professional valuation, combined with a Comparative Market Analysis from a knowledgeable area specialist, will usually give you a comprehensive picture of how your property should be priced. By blending multiple perspectives and insights, you can develop a robust strategy that accurately reflects market conditions. Do not be fooled by what your neighbour is asking - the selling price ultimately achieved is a far more valuable indicator.
What methods do professionals use to price a home accurately?
Most professionals blend Comparative Market Analyses with valuations, on-site inspections and knowledge of local trends. They may factor in less tangible aspects such as kerb appeal, layout flow and the state of the broader property market.
For newer properties, seven years or younger, a technical valuation can be provided whereby the property is separated in terms of land value as well as a dwelling value, which rate will be applied depending on the level of finish and condition. This statistical method is often an accurate reflection of the property's value.
For listings over seven years old, the above approach is inaccurate as the finishes in the dwelling will be perceived to possibly be outdated.
What happens if my home stays on the market for too long?
Properties that linger can gain an unwelcome reputation, whether or not it's deserved. Frequent price cuts suggest underlying issues, prompting lower offers and reinforcing buyer suspicions. Meanwhile, ongoing expenses can - and do - chip away at your profit margin.
Creating Urgency and Appeal
Buyer psychology often dictates that when a property appears to be a good deal, serious buyers move quickly to secure it. A reasonably priced home can generate that sense of urgency, especially when combined with:
- High-quality photography and an enticing listing description. Well-crafted visuals and text can help your property stand out online.
- A thoughtfully presented interior. At Hamilton's we provide guidelines on how to prepare your home for photography and viewings. These preparations can be invaluable in presenting your home in its best light
Correct Pricing is Your Skeleton Key to a Successful Sale
Pricing a home correctly from the outset merges data analysis with insight into buyer psychology. Aligning the asking price with market realities sets the scene for a robust, rapid sale, generating genuine interest and potentially multiple offers. Overpricing, on the other hand, can hamper the process by alienating qualified buyers, prolonging the listing and often leading to a lower final selling price than anticipated.
Although it may be tempting to overestimate your property's value, take a measured approach that accounts for local market conditions, current demand and comparable recent sales. By doing so, you give yourself the strongest opportunity to move on with confidence and achieve the best possible return on your home.
Ready to make a confident move?
If you would like expert guidance on pricing your home or wish to explore how small enhancements could boost its appeal, get in touch with our team at Hamiltons Property Portfolio. From comprehensive market analyses to practical preparation advice, we're here to help you list with clarity and achieve a timely, financially rewarding sale.
Your property is a major investment - ensure you're positioning it effectively to attract serious buyers who recognise its true worth.
Disclaimer:
This overview aims to highlight key considerations around pricing a property correctly from the outset. While every effort has been made to ensure that the content is accurate and up to date, circumstances vary and market conditions can shift. For tailored advice and guidance specific to your own situation, it is recommended that you consult with qualified property professionals before making any decisions. This material is intended as a starting point in understanding the importance of setting a realistic asking price and does not replace personalised expertise.
Hamilton's Property Portfolio: Serving South Africa's Upmarket Property Market
For over 20 years, Hamilton's Property Portfolio has been dedicated to meeting the needs of South Africa's upper property market. Specialising in luxury homes in prime regions such as Gauteng, the Eastern Cape, Western Cape, Garden Route and Winelands, Hamilton's is committed to providing personalised service and expert advice. Our team of professional agents understand the importance of finding the perfect home near South Africa's top schools and we're here to help you every step of the way.
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Author: Regan Harris