As top real estate brokers operating in Mumbai, I have seen a key difference that differentiates a home seller who quickly sells his / her property and a seller who cannot sell the property for the longest time. The key factor is pricing. Successful home sellers know the importance of pricing their homes correctly in order to make a speedy sale. If you are selling your home in the market and you have priced your home incorrectly it will result in attracting the wrong prospects and delay the sale process.
Avoid Being Misguided
We have met many property owners who refuse to budge from the selling price that they themselves have set thinking it’s the best price for their home. They have the misguided perception that their home will sell for a certain price irrespective of market conditions and price dynamics. No matter what happens around them or in the world, these set of sellers are absolutely certain that their house will sell for the amount that’s in their head! Period.
In the real world, setting a price and getting that price can mean two different worlds altogether! If you want to understand what pricing a property is all about first of all remember that there are a range of values that exist for every property. In my long experience as a real estate consultant spanning multiple continents, I can correctly state that the selling price of a property should range somewhere between 2 & 4 percentage points. This is unfortunately not how most sellers think. For them there is only one carved-in stone price for their property! The ultimate test is then whether your property sells at the low end of the range or the high end of the 2 & 4 % range. If you associate yourself with a high quality real estate broker then the broker will help you achieve a price that veers towards the top end of the range.
Understanding Market Value
Experienced property investors and flippers know the market in which they are selling. They understand the importance of the concept “Market value”. As a result of that they price their houses according to the market value.
People who don’t understand market value are more concerned about their own financial condition! They want to earn more money from the sale of the property to increase their own finances and completely disregard “market value”! For example these sellers have a “counting chickens before they are hatched” type of mindset. They will start thinking about using the money from the sale of the property to offset their business losses or to pay off loans or financing their children’s wedding etc. etc. In order to cover all their costs they add the required amount to the selling price of the house!
As a property seller, you want your property to fetch the highest price that the market can give you. But believe me, that extra amount will not solve all your financial problems. To get those extra funds you can always buy a lottery ticket 🙂 Why am I using the example of a lottery ticket? Well you actually have a better chance of making money from a lottery ticket than you have of selling an overpriced home in any given market. While this article is being written, the Coronavirus pandemic has ravaged the world economy like a pack of dominoes! While the recovery process has begun and green shoots have begun to arise here and there; if at a time like this you are trying to sell an overpriced house that is priced way above it’s “market value” then you need to pay very close attention to what we are saying in our article.
Set The Right Price Early
If you set the right price for your property very early on during the sale process then you have the best chance of getting the most qualified buyer to visit and see your property. Let us look at some scenarios that are likely to happen.
Lets assume that a property seller in South Mumbai wants to put her house on the market for sale. The property’s market value is ₹ 10 Cr. But because of urgent financial distress, the property is listed for sale for ₹ 15 Cr. The owner just wants to see whether it might sell for ₹ 15 Cr. considering the wonderful view of greenery from the balcony of the house, the double height ceiling blah blah.
Here is what happens – The potential buyers who have ₹ 15 Cr. as their budget walk through the house and are unimpressed and disappointed with the lack of certain amenities especially compared to the ₹ 15 Cr. homes that they have been seeing. This is especially true if you are a seller trying to sell off an older resale property. Most buyers in today’s times also visit the new under-construction and finished properties of developers and are particularly impressed by the value proposition of these new developments vis-à-vis your old property which lacks certain amenities and class. For ₹ 15 Cr. they get not just a home as big and spacious as yours in the newer developments but also a brand new apartment with world class amenities like clubhouse, swimming pool, gym, yoga room, banquet hall for which they will not have to shell out extra money for. That great view of the trees or the sea that you have been boasting about now doesn’t look so impressive to a buyer in the market!
Meanwhile all the buyers in the local market looking for a 10 Cr. house won’t even come and visit your house because they have rejected your value pricing because the price of your property exceeds their own budget range. What happens next? Because you happened to price your property right out of the market, the wrong people have been looking at your property. The result is that your property remains unsold for months and maybe even years to come!
Don’t Expect to Win the Lottery
I have never purchased a single lottery ticket in my life 🙂 But the feeling of suddenly coming into possession of crores of rupees is a great one I must say! I would say that many home sellers on the market also have that same lottery-like feeling when they put their properties for sale on the market. They fantasize about what they will do when their properties sell – take an exotic vacation, buy a Luis Vuitton, pay for the son’s foreign education, buy a Range Rover etc. etc. Or they will think on how they will settle all the loans and extricate themselves from the financial mess that they are in.
It is clear that the sellers are already thinking about spending the proceeds from the sale of their property which is why they have priced their houses right out of the market. Like I said before buyers don’t care about your financial dreams and why should they? If you yourself were a buyer would you care about the seller’s dreams?!
Let us look at another scenario which explains the buyer’s thought process. Imagine there is a serious buyer who is visiting two resale houses in the same vicinity as yours. Both are 4 BHK’s with excellent space, good views and a number of parking spaces. Both houses are in great condition and are located near each other. Now imagine that one house is priced at ₹ 10 Cr and the other is priced at ₹ 15 Cr. An educated and informed buyer will ask the broker or the seller why is one house priced ₹ 5 Cr. above the other house inspite of similarity in carpet area and other amenities. Most buyers will then assume that either the Seller wants to get out of debt or the Seller wants to move out of an older house and buy a newer home in a more expensive neighbourhood. Which is why he needs the extra money. Whatever be the case, do you think the buyer will tell the Seller, “Of course I would be more than happy for you to move out of Bandra and buy a house in South Mumbai! Here’s the extra money!”
Seasoned home sellers know that any serious buyer looking for a house on the market is going to make a decision on a purchase only after seeing a number of similar properties that are competitively priced. So when you sell your house on the market make sure that you take into consideration the rates at which houses in your area have been selling. If you don’t take the “market value” into consideration your house will never sell!