Is the price right?

The market has experienced wild shifts over the past few years leaving sellers, and even more so buyers, wondering “what is a fair price to transact a property?”.

Price guides attached to property sales have proved to be very confusing in some cases. As most properties are sold by way of auction in our area, the scope for pricing discrepancies is widened, as opposed to private treaty sales.

Price guides are estimated by comparing the subject property to recent sales of comparable properties and accounting for the differences between them. You may have two very similar homes for example, but one may have water views and the other may be on a busy road, so the desirability of the location is considered when providing a price estimate to the vendor. NSW legislation states that this range must be no larger than 10%.

As we know, interest rates on mortgages are related to property demand and prices. Since 2015, the market has undergone highs and lows – highs via record low interest rates and lows via the Banking Royal Commission, both of which influenced the amount of money we could borrow.

During the pandemic, the low interest rates were accompanied by a scarcity of stock which pushed demand and prices up at an unprecedented rate. It was therefore understandable that price guides were often 20% – 30% under the selling price, as the market was moving faster than the data that was available.

However, as prices rose, it was clear that some were using this to their advantage and patently ignoring sales figures that are at hand to active agents. This resulted in sales of properties hundreds of thousands of dollars over what was quoted and claims of huge results above reserve.

It was little wonder buyers were frustrated, but the lack of stock meant that demand outstripped supply so there was little choice but to battle it out with the other contenders.

Now that interest rates and stock levels have risen, the tables have turned so to speak. Buyers are no longer clambering to be the one to put the sold sticker on the signboard. They are more discerning and sensitive to price guides whereby, for the most part, they are not prepared to pay much – if at all – above the guide.

Pricing a property for sale is one of the most important elements in a property sale and it’s a fine line to tread. Underquoting a guide may attract buyers to your property but it also erodes the trust buyers have for the agent, undermining their effectiveness to negotiate. Overquoting may cause some prospective purchasers to overlook the property because they think they can’t afford it.

The job of the agent is to not only sell your home (let’s face it anyone could do that) but to get you the best price possible. They do this by using their resources, experience, area and market knowledge, negotiating skills and open communication with both the vendor and prospective purchasers.

Attracting buyers to your property is the first step so it’s important that the price is right! What is equally important is how you interact once they are there. Last year while the market was in a frenzy, properties could basically sell themselves. This year it’s a whole different ballgame and there is a lot more work to do if you want to extract every dollar available from the market.

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Published September 27, 2022

By Belinda Cassano