The mistake most people make when pricing their property
Published 25-SEP-2018 11:19 A.M.
5 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
Most people will face the prospect of selling a property at some point in their lives. It may seem fairly straightforward, but there is one mistake many sellers make in trying to get the highest price they can; overpricing their property.
Counterintuitively, many sellers think it’s best to start off asking for a bit more than they think they can realistically get. Whether they want to sell for a slightly inflated amount, or they believe that adding a margin will allow them to eventually sell for their ideal price, this tactic can backfire — the property can end up selling for less than it is worth.
LandMark White (ASX:LMW) State Director for WA, Nathan King, has over 25 years’ experience in the property valuations industry and with LMW.
LMW has developed a highly respected name in the property industry, having thrived in varying conditions, property cycles and trends. As a result, the team has a high level of knowledge around the kinds of complexities of a price sensitive market, such as the one experiencing in Australia today.
King believes that when looking to sell, it is vital to ensure that the property is priced correctly for the market, as overpricing will often result in extended selling periods — which is not only frustrating but can make it harder to obtain a healthy end price.
“Overpricing your property could mean that it sells for less because it stays on the market for longer. So, by ensuring pricing expectations are realistic from the beginning, this will work towards you getting a fair price for your property in a reasonable timeframe,” King recently told Finfeed.
According to King, it’s important to obtain an independent valuation (when selling or buying) that is professional, unbiased and takes the emotion out of the transaction.
“Generally speaking, we are talking about the largest investment or divestment that a person will make in their lifetime. People are willing to spend several hundred dollars having a second-hand car inspected before buying it, and yet shy away from spending a similar amount to ensure they appropriately price their most significant property asset.
“When spending half a million or even a million dollars or more on a property, to invest a few hundred dollars can give you that peace of mind to understand the true value of a property.”
Setting the asking price too high is right at the top of the list of mistakes people make when selling their property.
“Many sellers are under the impression that they need to add a margin to their property in order to achieve their actual price. Sellers assume that if they add a margin or, in essence, overprice their property they will be more flexible when negotiating a price with buyers.
“Although this may sound logical in theory, in practice overpricing does more harm than good and will result in your property stagnating for a longer period of time,” he said.
Further benefits of getting your property independently valued
King outlined other advantages of getting an independent valuation on your property, including the fact that an independent valuation company like LMW is not going to only tell you what you want to hear (i.e. a higher price than what your property is really worth).
“We are fee for service; you pay for a professional service, so it’s different to a real estate agent providing a property appraisal, where the end game is about the commission they’re hoping to make,” he said.
“What we provide is a fully independent service and it’s actually a legal document. If there was a dispute in future, or if we did get anything wrong, there are legal avenues for the client to take. Our documents stand up in a court of law.”
As outlined above, overpricing can do a lot of damage in terms of the end result, largely because it is more likely to stay on the market for longer — thereby giving buyers a reason to believe they can snare it for a bargain price. Yet under-pricing is another problem in itself, which is why the team at LMW aim to price properties as accurately as possible, based on all the available facts, as well as many years of experience.
In addition, an independent property valuer can provide professional advice beyond the appropriate pricing of a property — King believes that the good ones are all-round property professionals.
“Our team at LMW can make recommendations on what sort of assets you should be looking at, or alternative property investments that may suit your particular circumstances better.
“For someone purchasing, it may not be a quality asset and we may recommend that they consider some alternatives in their price bracket.”
Note that any decision with regards to adding this stock to your portfolio should be taken with caution and professional financial advice sought.
Valuing a property in a rapidly changing market
Selling a property in Australia today is a unique challenge, given the widely predicted volatility of the market over the next several years.
Last week, even Prime Minister Scott Morrison spoke of the possibility of a devastating house price crash. 60 Minutes did an investigation into the current situation with the country’s housing market in the same week, further confirming that it is not merely a concerning hypothesis of a few commentators, but a major talking point nationally.
“Right now, pricing expectations are still higher than the market actually warrants. So especially right now, if you need to sell, you would be wise to seek professional advice and ensure you set a realistic price for your asset. It’s important to stay on par with the market,” King said.
“Really, that’s our point of difference. We explain our rationale of how we arrive at the end figure through the evidence. We analyse the trends and provide an independent report of what sale price we believe the seller can achieve at that time.”
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.