What ‘price re­duced’ re­ally means

George Herald - Private Property - - Property News -

Visit any on­line prop­erty por­tal to­day, and you'll likely see a sur­pris­ing num­ber of Cape Town list­ings dis­play­ing a rather prom­i­nent "Price Re­duced" tag. This may cause some trep­i­da­tion for prop­erty own­ers think­ing about sell­ing in the near fu­ture, while also trig­ger­ing great ex­cite­ment from buy­ers on the hunt for a good deal. Ac­cord­ing to Schalk van der Merwe, fran­chisee for the Raw­son Prop­er­ties Helder­berg Group, a "Price Re­duced" tag doesn't al­ways mean what peo­ple think, how­ever.

"There's a lot of neg­a­tiv­ity sur­round­ing price ad­just­ments on prop­erty list­ings," says Van der Merwe. "Peo­ple as­sume that if a prop­erty price is re­duced, it's be­cause the seller is get­ting des­per­ate. There are sit­u­a­tions in which that may be true, but it cer­tainly isn't al­ways the case, and it's very use­ful for buy­ers and sellers to un­der­stand all the fac­tors that could be at work be­hind the scenes."

From the seller's per­spec­tive, Van der Merwe ac­knowl­edges that it's al­ways prefer­able to list at the per­fect price from day one, but says this can be dif­fi­cult when bal­anc­ing ex­pec­ta­tions with fluc­tu­at­ing mar­ket con­di­tions.

Agent's rec­om­men­da­tion

"If we look at Cape Town prop­erty a year ago, homes were sell­ing in 14 days on av­er­age," he says.

"Now, some list­ings sit for 60 to 90 days be­fore sell­ing, and at­tract of­fers be­tween 5% and 20% be­low ask­ing price. An ex­pe­ri­enced agent with ac­cess to com­pre­hen­sive cur­rent and his­tor­i­cal data, and on-the-ground knowl­edge of your spe­cific neigh­bour­hood, will still be able to ac­cu­rately price your home for sale, de­spite these changes. These rec­om­men­da­tions don't al­ways co­in­cide with seller ex­pec­ta­tions, though, and ne­go­ti­a­tions can lead to list­ings be­ing ini­tially over­priced."

Ideally, Van der Merwe says, sellers should re­ceive very clear and de­tailed rea­son­ing for the price rec­om­men­da­tion their agent pro­vides. This should in­clude de­tails on the com­pe­ti­tion, a po­si­tion­ing strat­egy

(high, com­pet­i­tive or ag­gres­sive for a quick sale) and ac­tiv­ity ex­pec­ta­tions for weekly view­ings and time on the mar­ket.

"It should be very ob­vi­ous to the seller where their prop­erty fits into the mar­ket and what they can ex­pect from the sales process," says Van der Merwe. "This in­for­ma­tion also needs to be up­dated by the agent on an on­go­ing ba­sis so that sellers can make in­formed de­ci­sions if their list­ing is not per­form­ing as ex­pected."

Ad­just­ing

If this does oc­cur, Van der Merwe re­as­sures sellers that all is not lost. Re­cov­ery is sim­ply a mat­ter of as­sess­ing why a list­ing is un­der­per­form­ing, and ad­just­ing its po­si­tion­ing by the cor­rect amount.

"This process is a lot more ef­fec­tive when your agent is backed by a team of sup­port staff who are ac­tively mon­i­tor­ing both on­line and in­per­son ac­tiv­ity," he says. "If on­line view­ings are high, but aren't trans­lat­ing into ac­tual en­quiries, for ex­am­ple, it's a good in­di­ca­tion that the price has been set too high. Ad­just­ing to a more com­pet­i­tive price doesn't mean you've failed or your home is un­wanted. It's a sign that you un­der­stand the mar­ket and are se­ri­ous about a sale." This, Van der Merwe says, is a valu­able les­son for buy­ers to learn as well.

"You should never as­sume a 'Price Re­duced' prop­erty is au­to­mat­i­cally a bar­gain," he says, "but you can take it as a good sign that the seller is more than just test­ing the mar­ket. Buy­ers still need to do their due dili­gence to make sure they're get­ting value for money, but they also need to be pre­pared to make a quick de­ci­sion if the prop­erty has been ac­cu­rately priced to sell." Whether you're on the buy­ing or sell­ing end of the "Price Re­duced" tag, Van der Merwe says the key to good choices is al­ways in­for­ma­tion. "Buy­ers and sellers both need to take full ad­van­tage of their agents," he says. "Ask ques­tions, get sup­port­ing in­for­ma­tion, make sure you un­der­stand ex­actly what they're rec­om­mend­ing and why. If they don't have an­swers for you, or you're not sat­is­fied with their rea­son­ing, it may be time to look for a dif­fer­ent team."

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