PROPERTY SIMPLIFIED: HOW TO PRICE PROPERTY
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PROPERTY SIMPLIFIED: HOW TO PRICE PROPERTY
INTRODUCTION
Property like any other product is Price sensitive it determines the speed a product is sold at and the amount of interest the buyers give it. Price is what buyers are willing to pay for the product. Every property priced correct can be sold in about 14 working days provided all the basics have been covered. A pyramid system happens on every product, when the price goes up less people show interest and when the price drops more people show interest on the property.
PRICING
A comparative market analysis should be made to determine the price of the property. This is determined by alternative and substitute products in the market. Most importantly a price of a property is established by the last property sold with the same specifications. The common mistake people make is determining their price by advertisement prices. When a property is advertised at P1M it doesn’t mean it is going to be sold at that price, that is a number the owner want but it does not command what the buyers are willing to offer. The properties that have failed to sell in the market give us the price ceiling of the area, it highlights that above that price no sale can be achieved.
VALUATION REPORT
Valuation Report is a professional opinion of a Realtor which estimates the monetary worth of the property. Therefore, the Open Market Value does not necessarily set the selling price of the property but provides gives a guide to the pricing within a property market like Phakalane or G North currently the current O.M.V is high but the buyers are not willing to pay at that equivalent therefore, most buyers would want to offer 90% of O.M.V or less.
LOCATION & PRICE CEILLING
There is a common saying that misinformed property lovers like to use, “You can never go wrong with property”. Investing in the wrong location can lead to severe losses. Every location has its own Price ceiling, e.g Gaborone North property activity is between P500K to P1M, any product above that price bracket takes more time to sell and Tlokweng activity is between P500k and P1.3M, so each area has its ceiling and pricing above this delay the sale.
IMPACT OF OVER PRICING ON THE SELLER AND THE BUYER
Seller
The seller sells the property, the buyer buys, the agent facilitates the selling process. If the seller delays the selling process by over pricing they lose the Time value of money, what P100 can buy today will be different the next day. Accumulated interest also becomes high as the outstanding debts are not cleared and this reduces the net value for the seller. Over pricing property can also lead to failure of the deal, and over exposure of the property. Property like any other product when it stays long in the market buyers begin to think that they is something wrong with it and this delays the process further. All buyers want fresh products so any product that stays long in the market risk being failed to sell.
Buyer
The best time to sell any property is within the first two weeks of listing if this fails then one of the basics was not done right. The agent needs to review the marketing strategy and reposition the product. When the Seller has overpriced the product this can delay or make the deal fail. The Banks usually finance 90% of the O.M.V, and the buyer still have to pay 10% deposit, bond fee, transfer fee and transfer duty and other costs like valuation reports, structural reports and bill of quantities, therefore, even if the bank is willing to finance the buyer the overhead Capital required from the buyer can make the deal fail because the seller has overpriced the product.
CONCLUSION
Therefore, the sellers are advised to get a Valuation report for the property to give a guide and a Comparative market analysis to determine similar houses that were sold in the area with the same specification and this information is available at Deeds. The seller needs to make the price attractive in the market also for a quick sale by pricing between 80% and 100% of the Open Market Value. Costs incurred and Capital invested should be taken into consideration and establish a high return on investment and sound break-even point.
This advice is free from any Realtor, contact me anytime…..
ISAAC FLAVA MOLEFINYANA
| Cell Number | (+267) 72 116 388 |
| Office Number | (+267) 397 3333 |
Author: Isaac Flava Molefinyana