HOW TO DETERMINE AN ASKING PRICE
With a mass of information at their fingertips, buyers who are seriously looking at purchasing a home will soon become very knowledgeable about what they can get within their price range. For this reason, it is ever more important that sellers set the correct asking price when placing their home on the market.
Buyers are comparing each of the properties that they view, and a home that has an asking price above the competition will not compare well – especially if it offers the same perceived value. It is imperative that sellers view their home as objectively as possible, taking emotion out of the equation and looking at the facts and figures at hand. As a start, it is possible for homeowners to obtain a municipal valuation of their property from the local authority. However, this value will not take into account any upgrades that have made to the home.
Most sellers believe that a house is worth what they paid for the property as well as the additional cost that they have spent on renovations and improvements. While this is true to some degree, it all depends on a buyer’s perception of how much value the improvements have added to the property. Upgrades and renovations are all subjective and are often based on personal taste and requirements.
A professional valuer will be able to provide a valuation of the property based on several aspects such as the home’s location, size and square metre pricing for the area. An estate agent who is a registered valuer will be able to provide sellers with an estimated value of their home by conducting a comparative market analysis. A real estate professional will have access to information that the homeowner won’t, such as the selling prices of other homes in the area over the last six months. This kind of data is very important when determining what buyers perceive as a fair market value.
Even with all the information, however, there is no exact science to pricing, and the comparative market analysis won’t include all of the differential features of the property, such as the views from the property, current condition and surrounding amenities. All these aspects must be considered by the agent and seller as they will have an influence on the price of the home. A comparative market analysis is merely the starting point, while the value of the property is fundamentally subjective.
An element that largely influences the perceived value of the property, which is out of the seller’s control, is the current market conditions. In a buyer’s market sellers will possibly have to lower their asking price to remain competitive, whereas, in a seller’s market with low inventory stocks they will have far more negotiating power. Property pricing is synonymous with demand, and the value of a property is established by the prospective buyer. What this means is that a home’s value is largely determined by what buyers are prepared to pay for it today.