Emotional issues can affect sales
Selling a home can be an emotional roller coaster for an owner, but the key issue remains deciding on the correct price. Lea Jacobs explains
COMMONLY referred to as the three Ds, the most frequent reasons for putting a home on the market are divorce, death and debt. The decision to sell, regardless of the reason, is an emotional one. After all, having lived in a house can stir up a wealth of emotional issues.
Children have been brought up and played in the garden and memories of birthdays, anniversaries and family get-togethers remain entrenched. In the seller’s eyes these memories are priceless, so sellers tend to wear rose-tinted glasses from the moment they list the property.
However, there is generally a rude wake-up call when the first offer comes in. While the owner may believe his home is worth more than what is being offered, buyers have a different view. Finding a happy medium is difficult.
The original price the homeowner paid for the home appears to be irrelevant. The state of the market, where the property is situated and what the home offers, play major roles in deciding what the property is worth.
In a seller’s market home owners may get away with a lot, but during a downturn, when buyers are spoilt for choice, it becomes almost impossible to get more than the house is worth.
The mortgage crisis overseas has played a role and South African banks, nervous of the implications of over-capitalising on properties, have refused to grant bonds on what they deem to be an overpriced property.
Carol Reynolds, area principal for Pam Golding Properties in Durban North and La Lucia, says unfortunately there has been a lot of press about an increase in buyer activity this year.
“Sellers have been optimistic that this has translated into an increase in price inflation. The reality is that the FNB house price index was at 10,1% in July, and has in fact declined to 7,1% in August, with experts predicting the average price growth for the year to be a slow 6,4%.”
She says there are many factors driving affordability in the current market and despite the willingness of buyers to transact, sellers will not achieve inflated prices for their homes because the banks will not find value.
“The banks are buffering-in a cushion to account for interestrate fluctuations and rising costs and they take all these factors into account when assessing bond applications.”
And unless a property is correctly priced it will not sell.
“Buyers may be curious, but they are noncommittal, and until this changes and the lending climate relaxes, prices will remain stagnant.”
It is evident that the property industry has borne the brunt of the recession. The number of estate agents has dwindled dramatically and those who are left are fighting battles on a number of fronts. Houses are taking longer to sell, buyers are struggling to raise finance, and most frustrating, perhaps, is the unwillingness of sellers to heed their agent’s advice and price their homes to sell.
The Private Property website has initiated a programme aimed at helping sellers base the selling price on realistic, unemotional facts. Their system allows homeowners to obtain a valuation using factual data from the Lighthouse Group.
Chairman Justin Clarke says the public’s response to the project has exceeded expectations.
“The site is free and available to any home owner in SA. It’s no secret that the biggest challenge facing the seller is correct pricing. There is always a buyer at the right price, but it is difficult to provide an exact appraisal. Who knows what a willing buyer is prepared to pay? After all, it is a personal judgment that the buyer will make. However, get it wrong and the home will either sell for far less than it was originally on the market for, or worse, not sell at all.”
Knowledge Factory’s SAPTG arm offers a similar service. Evaluate provides instant property value estimates to any cellphone via SMS. CEO Geraldine Mitchely says the data provided is unbiased, as it draws on data from Deed’s Office registrations and the property market expertise of SAPTG.
Reynolds says that convincing a seller that a property is overpriced is not easy and the price counselling process can take as long as a year.
She says that sellers need to realise that the buyer’s pool shrinks substantially after the initial 4 to 8 weeks of a mandate. Essentially, this means that if a property does not enter the market at the correct price, by the time the price has been adjusted in accordance with market conditions, the buyer pool has moved on and the seller loses the activity that drives pricing upwards.
If valuing a property correctly is so vital, why do so many sellers ignore their agent’s advice?
“Sellers often think that agents undervalue property to achieve a quick, easy sale,” says Laurie Werne, MD for the group’s Western Cape region.
“Unfortunately, as with any profession there are those whose integrity and intentions are flawed. This is, however, beginning to change and sellers can guard against this by selecting a reputable agency, rather than choosing the one that charges the least commission,” he says.