Paperwork and Pricing of a Property
As a property seller before you start selling your property and assuming that you have hired a real estate agent for the job, there are many things that you need to work out with your agent before you start marketing your property to attract the right buyers.
First lets look at the paperwork involved.
Sales Agreement with Real estate agent
When you partner with the right real estate agent to sell your property the agent will provide you with all the right paperwork. First of all you need to sign an agreement with the agent. The agent needs your written permission to sell your property and this is done by first signing an industry-accepted sales agreement. There are many important points that you may have already discussed with your agent and these are outlined in the sales agreement such as:
- The sellers name and other details which will also be on the final sale contract
- The agent’s name and office details
- The property details and whether the property is leased or vacant
- The asking price of the property
- The seller’s solicitor’s details if required
- The period of time that the agent has the right to sell the property for
- The agent’s agreed commission fees
- Agreed marketing costs
- Legal clauses
Once the seller and the real estate agent sign and date the agreement, the next part of the sales process can start.
Please read our sample Agent Seller agreement template by downloading this word document here – Real Estate Agreement Agent Seller Template
This is our agency agreement that we sign with sellers with some modifications tailored for every seller. Other agents may have slightly different terms and conditions.
Title and Previous Sale Agreement or Transfer Deeds
You should not promote or start showing the property to buyers until all the papers proving your ownership status of the property are in order. If they are not in order you need to consult top real estate lawyers to fix the legal issues rightaway. Because it would be futile to try to sell a property that has legal problems because the buyer’s lawyers would immediately pinpoint the problems thus ensuring that your property will never get sold. If the future buyer is applying for a home loan then the bank will also need to get a copy of all the documents to start the loan process. And the sooner the bank receives the paperwork the sooner they will approve the buyer’s loan and the sooner you will receive the money into your account.
Breaking down the Barriers
Apart from the mandatory paperwork there are also documents which your agent or your lawyer can identify to make a sale go more smoothly. Any document that you can give to the buyer that provides answers to their questions removes a barrier for sale of your house.
For instance if you live in an apartment, then you will need to clear all liens and dues and get a NOC from the society enabling the buyer to know that there are no outstanding liens or legal issues from the society before he / she moves in.
If your property stands on collector’s land then you will need to get a Collector’s NOC to sell the transfer the flat to a buyer.
Valuing Your Property
Now we are coming to the critical part of the sale process. The important question at this juncture is – How to price your property? What is the real value of your house and how do you determine the same?
Its not an exact science and there are a number of variables. Different people will have different opinions of what your property is worth. So it is important to first be sure of what criteria you are using to decide the asking price for your home.
Even your real estate agent and other agents in the market will have their own subjective opinion on the value of your property. But this is exactly what it is – their opinion which is based on their own experience and research, be it right or wrong. You must understand that you cannot rely on your real estate agent’s word as the final word on the asking price of your property. Real estate agents like us are not Govt. registered valuers so we can only provide our own opinion on value. If you ask three different real estate agents you are more likely to get three different opinions which may differ by 10% or 20% or even more.
A Professional Written Valuation
If you require a written property valuation then you will need to hire the services of a registered property valuer to give you their professional written valuation report. There is of course a fee for this service. It can range from ₹ 15,000 to ₹ 50,000 for a professional valuation report. The valuation provided may or may not reflect the opinion of the buyers. For example a bank valuation of your property for the purpose of a loan will be on the conservative side because banks do not want to lend money to an overpriced property!
The valuation of your property is a snapshot of the market on the day that the valuation is undertaken. A lot of factors and calculations are taken into account to valuate your property beginning with the age of your property to comparable market rates of similar properties. Your valuation report of 2024 will be less reliable as the years go by since the market shifts all the time. In a booming real estate market such as the one in Mumbai in the year 2024, a property valuation that is more than six months old may be considered out-of-date though the valuation figure may continue to reflect a price that the property owner believes to be the right price for the property.
The Price is What the Buyer is Ready to Pay
So who do you believe finally? Ultimately the sale value of your home is determined by the buyer who makes an offer price to buy your property. Genuine, qualified and motivated buyers represent the current real estate market in any city or timezone. A buyer’s first offer for a property is usually not the final offer. It takes an experienced real estate agent to work with the buyer and convince and negotiate the buyer to offer the final and best offer. We in the business call this the “walk away price”.
The walk-away price is the most price that a buyer will pay to buy a home at this moment.
When you put your house for sale on the market you and your real estate agent are usually guessing what a buyer’s final offer price will be. When you receive the final and best offer from a serious buyer its only then that you finally know what the price value of your home is.
You can choose to close the transaction with that buyer if you are happy or else you can keep marketing the property to find another buyer who is prepared to pay more. But you have to remember that you are taking a chance because all other buyers you meet in the future may be willing to pay less.
There is an oft repeated truth in real estate:
The first buyer is often the best buyer!
In most cases there are three prices for every home:
- The Seller’s price which is usually the highest figure
- The real estate agent’s price which is usually lower than the seller’s price
- The Buyer’s price which is usually lower than the agent’s price.
The only correct price is the negotiated final walk away price from the buyer – no other price estimate matters!
Taking Opinion of Friends and Family
Choosing to sell your house which is probably your biggest asset in life is a very important life decision. But what is even more important is choosing the right real estate agent to sell it and the right price to sell it. But then why is it that some property sellers take advice on such crucial life-changing decisions from unqualified but well-meaning friends and family?!
When it comes to property prices please remember that everyone has an opinion. And listening to unqualified opinion could cost you a lot of money. Your friends and relatives may genuinely believe that they are right but ask yourself this question – do they buy and sell property often enough to be able to give you reliable advice on your property buying options? When it comes to matters of the heart please listen to your well wishers including your friends and family but when it comes to matters of the wallet make your decisions based on facts. Always price your house based on the advice of real estate professionals who have solid experience of buying and selling and do it all the time.
Selling your house is a business transaction and as such you should treat the sale in a business-like manner. Yes it can also be an emotional journey. Hence if you cant separate your feelings from the business aspects of the deal simply leave it to your real estate agent to set the right sale price for you.
Determining the Right Price
Apart from choosing the right real estate agent to sell your house the most important decision you can make is set the asking price for your property. The asking price for your property should reflect the full market value of your property and yet should be realistic and attractive enough to demonstrate value to the buyer especially when compared to similar homes for sale in your area. Your asking price for the property must be both attractive and competitive.
You have to remember that the most valuable features of your property are it’s location, size, construction and age. To be appealing to buyers in the market your asking price must be in line with other similar property values in your area and with other similar properties that have sold recently. The going property rates in your area are determined by the state of the economy, interest rate trends, the absorption rate and buyer confidence.
Comparative Market Analysis
So how does one go about finding a suitable pricing guide? One of the best ways is to compare recent home sales in your area with your own home and determine which houses are not as good as yours and which ones are better. If you own a 4 BHK luxury home in Bandra suburb of Mumbai you should be looking for 4 BHK luxury home sales in similar buildings in Bandra. For this information websites like zapkey.com can be good resources for researching property sales in your area. You need to have a good knowledge of the sold homes in your area to be able to do this effectively. You must be armed with knowledge of the names of comparative apartment buildings to do this comparative market analysis effectively. Though the information on websites like zapkey.com is not completely accurate due to the cash component factor in a sale that is not included in the final sales figures on such websites.
If an apartment like yours nearby sold about a month ago for a certain price and your home is similar but your building has more amenities like a gym and swimming pool then your home should be worth more. If another apartment near your house sold a month back with one less bedroom than yours then that home should be worth less than what you are quoting for your own home. But as we have discussed before only a serious buyer who wants to buy your home will decide at what price your home is good value. Remember:
There is no retail price for a resale property. It takes a willing buyer and a willing seller to agree on the price for a home.
Similar homes often also sell for different prices because one buyer values one property over another for their own reasons. Most home buyers are very price-sensitive and are looking for reasons to exclude homes that they look at rather than include them in their search. That means that if a home is slightly overprice and above their budget they will not even bother to visit and inspect the house.
Therefore if you are serious about selling your property quickly then you must remember that overpricing will deter genuine buyers who may have otherwise visited and made a genuine offer on your house.
But having said that, buyers look at homes that are selling within a certain price band in the market not just at a single specific price. Thus if a home is reasonably priced it will be perceived by buyers as good value for money and then the seller will receive multiple offers for the house. This will result in a situation whereby the seller’s real estate agent can start negotiations with all the interested buyers to find out which buyer is willing to pay the most for the house.
Can you Price a House Too High
The short answer is – yes. You can price a home too high by ignoring the facts and hoping for a miracle. Remember – Hope is never a strategy. Lets look at the below situation:
On the other hand if the market is going down an overpriced home will be higher than what the buyer thinks is good value and even after price reductions it will remain higher priced than what buyers are willing to pay.
Your Real Estate Agent and Price
As I have mentioned earlier but it should be repeated again – market opinions and market appraisals are NOT valuations. Real estate agents are agents – not valuers. Having said that, a good real estate agent will have a good idea of what your home is worth based on comparing to other similar properties in the local market and also based on their own experience. But then again, three agents can give you three different opinions!
A Buyer’s Opinion on Price
In the same way that sellers do their research on the market, buyers also do their homework in similar ways. They have access to the same property sale reports on websites like zapkey.com and other information found online. They can find out what similar houses like yours are selling for right now and what was the transaction amount of the last sale that happened in your apartment building last month. This means that you can expect buyers to know at least as much as you know about your local neighbourhood or even more! They will definitely be visiting and inspecting more houses than you have done in the past and thus they will be better equipped to compare your home with others with more authority than you can. Buyers also know good value when they see it and that is what they are focused on finding when they set out to hunt for properties.
Buying real estate brings three important human responses into the mix. And when all three come together, the buyer makes a shift from a logical buyer to an emotional buyer. It’s the emotional buyers who pay a premium price for a property. So how do we tap into the emotional side of a buyer’s mind to make your property stand out in their mind? Its all in the presentation and this is something we will cover in the next article. And one last thing to add in this article – Location!
Location, Location, Location
You must have heard the oft-repeated phrase many times in the past – that real estate is all about location, location and location!Location is indeed the single most powerful aspect of any property because you can change everything about a house except it’s address. The location of your house will also impact the marketing and sale process.
The asking price of your house needs to be in sync with the location of the house to find the best buyers. The good news is that there are always buyers for every property which is at the right price range. You may think that your location is bad and that compared to say a property that is sea facing your house may not sell. Think again. In Mumbai there are literally thousands of apartments that face busy roads and highways with honking traffic spewing fine particulate matter that can harm your lungs, or properties that are situated right next to airports or under flight paths, right next to railway tracks or situated near dangerous chemical factories (think Navi Mumbai) or overlook crematoriums and graveyards or stinky drains (all over Mumbai!). Doesn’t matter! There will always be a buyer for a home! After all, a man or a woman’s home is his / her castle no matter where its located. Its just that some castles have better addresses than others and therefore cost more.
Do remember that if your flat overlooks any of the above negative factors then you can expect that buyers will take that factor into their price consideration just as you did when you purchased the flat. Of course if the highway, crematorium or the fertilizer factory came up after you purchased the house many years ago, well then its just your bad luck! All buyers will expect that your house be priced appropriately reflecting its location whether good or bad.
There is no magic algorithm or formula for calculating the price of a house in a great location as opposed to a house in a not-so-great location. However just like I have mentioned in the earlier part of the article you can research sales of comparable homes like yours in the same street or same building that have sold recently. This will help you arrive at a price range for your house. Remember every sold house in your street or neighbourhood affects the price of your home. Having gone through the entire sales process, these property sellers have tested the market for you! Unfortunately for you when a distressed seller in your apartment building sells his / her flat for less than market value it has an adverse impact on your home value whether you like it or not. Similarly when a house goes for more it also has a positive impact on the property value of your house! Enjoy the ups and downs. Its called life 🙂
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