Most property sellers in the market looking at selling their property make the mistake of not fully knowing the facts of the property market where they live in before deciding to sell their property. Which is why when the market is bad they fail to sell their property for the longest time. As top real estate consultants we like to advise both property buyers and property sellers through our official mouthpiece – our blog. In this article we are addressing property sellers.
One of the most crucial things that you can do to get your house sold is to first properly learn your market, know the correct value of your property and also what the competition is selling for. Most sellers operate in the dark by simply putting their house on sale for the price that they have decided without considering what other similar houses in their locality have sold for in the recent past and are currently selling for.
We do not need to inform you that one of the biggest dangers of overpricing or even underpricing your home is that you can incur lakhs or even crores of rupees in losses. If your property is priced too low people may assume that there is something wrong with the property. If its priced too high then buyers will not even want to come and see the property. In this article we will show you how to research the property market effectively so that you can set the right price for your property which will speed up the sale process.
Knowledge is Power
I have always advised property sellers to think 3 dimensionally when selling their property / properties. The first dimension is the general mood of the market. The second is how your ship is sailing in that market. The third dimension is the period of time that you need to sell your property. Let us see how this principle applies to the selling of your property. For example if the prevailing local conditions of the market are such that the number of sellers far outstrip the number of buyers in the market and considering that you have set yourself a period of two months to sell your home then it is obvious that big efforts and aggressive pricing will be essential to get to the closing table quickly. Moreover if your property is like many other properties available in the market and lacks any USP (desirable locality, nice apartment building, great views from the windows, balconies, sea views etc.) then a certain amount of creative thinking and marketing using out-of-the-box thinking and spending on improving the look of your property may be required.
Hire a Home Inspector
Hiring a home inspector will give you a competitive advantage as a seller. It is common practice abroad and now even in India for property buyers to hire a home inspector before signing cheques to get a complete report and a thorough inspection of the premised of the property they are going to buy. But I would advise smart property sellers to also hire a home inspector before putting their property for sale. The home inspector will identify latent defects within the house that might be discovered by the buyer and end up killing a deal. Correcting safety issues before selling a house can also help the seller to avoid potential legal issues as well.
Click here to read more about home inspection – Home Inspection Services in India. If you are looking for a good home inspector for your property we can also advise you on the same. Call us or whatsapp us on +91 9820607875 for a list of home inspectors that we at Gupta & Sen approve and work with regularly.
Getting a Macro View of the Local Market
Before we get into the aspect of fixing the value of your property take a pause and have a look at the surrounding market conditions and trends. Macro view data of the property market is generally the domain of the appraisers and real estate consultants. These class of professionals can help you with macro view data of the market.
The Supply Quotient
The supply quotient is the ratio of the number of homes for sale in your area divided by the number of closings in the last 30 days. Though in a country like India where exact sales data is hard to collate, as a seller you should know atleast what the term “supply quotient” means. The supply quotient is a useful indicator of supply vs demand in your neighbourhood.
To find out the supply quotient you first of all need to decide the boundaries of the local market. You can call this your “defined geography”. It’s the area where there are a similar number of houses like yours. When we say area we mean close by and not on say the other side of a river, railway track or a main highway. For example there is a difference in rates and supply quotient in Andheri West and Andheri East even though both areas are called Andheri. Similarly Andheri West can be subdivided into many neighbourhoods like Yari Road, Seven Bungalows, Lokhandwala etc. If you own a house in Lokhandwala Market Road then you should restrict your “defined geography” to the same area and not venture out into say into a Runwal Elegante area or the Lokhandwala backroad. Similarly if your house is situated at Malabar Hill that should be your “defined geography” and not venture further into other areas like say Tardeo, Breach Candy or Nepean Sea Road.
Once you divide the number of homes for sale in any given area by the number of sales that have happened in the last 1 month you have the “supply quotient”. The supply quotient is a figure that gives you approximately the number of months that it will take to sell all the homes within your defined area at the rate at which the homes are currently selling. For example if 60 resale homes are available for sale in your area and 10 homes have sold in the last 30 days then the supply quotient is 6. Therefore if no extra houses go for sale in the market it will take 6 months to sell the current inventory.
A supply quotient of 6 is a good one. It’s a market in which buyers are sellers are represented in equal numbers and balanced. If the supply quotient is lower then the market favours sellers. If the supply quotient is above 6 then it’s a buyer’s market favouring buyers. Understanding this supply quotient can help forecast the time it will take to sell a property and save property sellers a lot of money and not to mention time.
For a seller and real estate consultants like us, having an idea of the supply quotient gives you insight into the sale process much like radar and sonar helps the captain of a ship to navigate through the seas. It gives you a macro view of the market. Knowing the supply quotient the seller can become tough or easy depending on the number. For example if the supply quotient is a small number and if the seller knows this then the seller can be prepared during negotiations to say “no” because of the knowledge that the market conditions are favourable to the seller. Similarly the converse is also true. If the supply quotient is a larger number then the seller knows that he needs to say “yes” quickly even if the offer is not upto the mark because the deal has to be closed quickly in such market conditions or the sale process might get longer and the seller will lose a great deal of money in “opportunity costs” and other losses which we have covered here in a previous article here.
Must we remind you here that the supply quotient is the theoretical amount of time that it will take to sell all the homes on the market at the current rate of closed transactions. If you don’t have any hurry to sell and enjoy playing lottery then feel free to price your property as high as you like! However if you know that the quality of your life will be hurt by not selling fast and your decision to get the sale done and over with is important then our advice is – Do not play games with pricing!
Sometimes You are a Winner When you Lose
Lets take the example of Amit. It is the year 2025. Amit had purchased a home for his family in the year 2018. Post Covid-19 lockdown in March 2020, Amit had some unexpected financial problems caused by the Coronavirus crash of the economy, a divorce and job loss. At this point, Amit became a very motivated seller. He enlisted a top real estate agent in the area. After studying the relative neighbourhood sales figures and calculating the supply quotient, it was apparent that the pricing would need to be fixed at less than the price he had paid for the house when he had purchased it 2 years ago. The supply quotient told him that the market was changing rapidly. At the time a 10 % loss on the house seemed to be too much to bear for a white collar professional like Amit. But because he had to sell and he trusted his agent’s advice, Amit agreed to take one of the first offers he had which was a loss of 10%. Cut to the year 2025, his house had become 30% less in value than what Amit had originally paid for the house. It was then that Amit considered himself lucky to have listed to his agent and paid heed to the supply quotient figure.
Bulls make money, bears make money but pigs get slaughtered!
There is a saying on Wall Street, “Bulls make money, bears make money but pigs get slaughtered!” Funny as the quote is, it underlines a basic truth. In the world of real estate as a property seller you must always price your property keeping your eye on the supply quotient and also listen to what the market forces are saying. This will help you avoid the grave error of mispricing a house when it first goes for sale on the market.
Imagine a love story where a beautiful princess is being wooed by a handsome prince. He tells her that he wants to pay a visit to her. She tells the prince that she has a long list of conditions and prerequisites that will take the prince a long time to fulfill before she will even consider meeting him. Meanwhile there are a line of princesses of other kingdoms who are making a beeline to the prince’s palace. Does this example say anything? As a property seller you are in the position of the princess. You should know the supply of princesses and the available qualified princes in your area before you make many demands of the princes 🙂