Market Basics

Seller's handbook Market Basics

Sellers Guide: The anxious question in every seller’s mind: how much can I expect to get for my home?

The short answer: what the market will pay for it. The person most qualified to put a figure on what this market price is likely to be is an independent licensed property Valuer. For around $300 you should get a physical property inspection and a written assessment of the likely sale price of your property, given what homes of your type and location have sold for recently. We at Owner.com.au strongly recommend obtaining an independent professional Price reflects location more than the virtues of a buildingvaluation before you list any property for sale. Some sellers think they can use estimates from prospecting real estate agents to guess at a list price for their private sale. This is not the bargain valuation it appears. For starters, generalist real estate agents are not going to do the organised research and reasonably sophisticated mathematics involved in a trained licensed valuation. But the main reason it is a mistake to rely on a real estate agent’s guess; agents are not going to be disinterlocation refects the home priceested and objective about the sale of your home. The majority will try to “buy your listing” through over quoting how much they can sell your home for, all along planning to “condition” you, so that later you come to accept the fair market price that an independent professional Valuer would have supplied you with in the first place. Standard conditioning practice is to use the long blackmail of an exclusive signed agreement to make you desperate to sell, thus accepting a more market appropriate offer. Also, agents use the expense and stress of failed auctions or expensive marketing campaigns to get owners to be realistic about the true market price. Don’t let your private sale follow this same miserable path, and get a professional Valuer in.

A word of warning on some Valuers. Not all are independent, some being attached to a real estate agency, and you’ll want to avoid these for the obvious conflict of interest problems. Ask them up front about their affiliations. And as always get a few quotes. Inform your Valuer about your private sale needs; a good Valuer will not only be the source of setting your home’s price, but also will be knowledgeable about general private sale and real estate advice.

Even armed with a written valuation however, you will be still more confident of your price if you research the state of the market yourself. An internet search will reveal that nowadays there are many free services to get area and postcode price lists of recent sales, and free or low cost services to give individual property estimates based on generic features of your property. These general estimates can give you further price confidence.

You are only truly ready for a DIY house sale (or sell using an agent for that matter) when you have both confidence and objectivity in knowing what your property should fetch in the current market.

Getting the price exactly right on first listing is more important than the Australian punter’s “give it a go” attitude might urge. Simply putting a high price to start with and hoping to negotiate down to something more reasonable later won’t do. Firstly, in the list of houses available yours will seem too expensive, even seeming shabby for its (wrong) price bracket. Conversely, a house priced way too low will be snapped up before it has time to reach the buyer it “fits”, who would have paid more, although in today’s price conscious, somewhat real estate obsessed world, underpricing rarely happens. Much more common, and the single biggest mistake in the For Sale By Owner process, is that people list at (even only a few percentage points) above valuation level. The house enters the market with only a little initial curiosity which quickly dies off. Such houses have been branded or ‘burnt’ by the market, considered as belonging to unrealistic or unmotivated sellers. This is a particular danger for a private sale as buyers suspect that high priced listings offered DIY For Sale By Owner are either by sellers too in love with their home to be objective or only ‘fishing’ for that unwary buyer. A big spender buyer, ignorant of market prices, is actually a mythical creature. Considering the reasonable financial savvy needed to save thousands for a deposit most buyers already have a fine nose for value. Way over paying in any case is likely to be stopped by the lender, who is in fact usually the home’s true buyer!

Activity in your local area is a good guide to the real estate marketThe other major reason you should not be tempted to list higher than a valuation price, even for a short while, is that among buyers that inspect in the first few weeks are people who for quite some time have been keen on your home and/or area. You do not want to put these prospects off from an inspection by listing above reasonable market price. These first-to-inspect are often high quality motivated buyers who will pay a good price for your home, giving you a quick sale and saving you thousands in commission and advertising costs. This is a common success story with private selling, as can be seen where nearly half of all no-agent sales are going to someone already known by the seller, even if known only as a distant neighbour.

Some seller’s try to avoid making the tough decision of fixing a market price for their home by giving a price range or “expressions of interest”. These listings are very unpopular and frustrating to buyers, and result in few inquiries and properties getting burnt to the market. Besides, most buyers restrict their searches by price, which means your listing won’t show. For these reasons we have the policy that all listings on Owner.com.au must reveal a single price value.

As a final fine tuning to the price you will have to understand the nature of the present real estate market. Are you in a “buyer’s market” or a “seller’s market”? A buyer’s market will mean a tougher job ahead of you. If the market is unfavorable you will need to split those commission savings that you’ll get through private selling, to list at an attractive one or even two percent lower than valuation price. You’ll see the signs that you are in a buyer’s market when there are many houses for sale, most having been listed for a number of months, and in the worse case house prices may even be dropping. If you’re in better luck, however, you’ll be in a “hot” or seller’s market. The news is good with house prices moving up, few listings and quick sales.

In a buyer’s market you should price your house very competitively and work harder, putting a decent budget towards marketing. If you need to sell quickly, you may need to offer your house “bargain priced”. If however there is no compelling urgency to sell, question whether it may not be better to wait to list until the market improves. The real estate market is cyclical. In selling such a big and emotional asset as your own home, it is important that you should remain in control of the process. Don’t be at the mercy of an agent third party, nor to any one particular buyer who is after all replaceable in Australia’s open real estate market. But also, if life circumstances permit, try to avoid letting “the market” itself force terms, as selling in stressful economically depressed conditions can create illogical panic and pressure. Unless your personal situation requires you to sell in the next year, it may be prudent to time your sale for a better economic climate.

In a very hot seller’s market, with plenty of time and savvy marketing, you could conceivably price somewhat above what is the valuation price for your home. Here you are gambling that you will catch a rise in house prices. With a steadily increasing pool of buyers, being burnt to the market is less of an issue. If your guess was wrong and the market is flat and not rising, or despite good conditions you are not getting many inquiries, you should quickly reduce your price to valuation level. Even in a hot market it is recommended that you do not price more than one to three percent above a recent valuation price. The basic mantra of successful private sale real estate sales is “price price price”.

If you are in a depressed market and decide to wait before selling, keep an eye on the situation through real estate news channels, interest rate lowerings, increases in the volume of newspaper ads and also checking internet sources that provide lists of recent sales. The organized seller could file this information gathered under major price categories such as the suburb and the size of house (in bedrooms). Try to get a subjective feel for how your house fits into the market so you can intuit if sales in your property category are becoming more frequent and prices accelerating. Subjective does not mean emotional; look at your house and street as a buyer would, just one choice among many. The to-the-dollar specific price you’ll eventually get will depend on who comes along and how well you negotiate with them. By timing your sale at the beginning of a heating market you are well placed for that quick sale at a good price with little needing to be spent on marketing, because the buyer themselves will feel under pressure. Hot markets are excellent conditions for a no-agent-commission private sale. Why give thousands to an agent when buyers are desperate and homes sell themselves?

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