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Dangers of Overpricing a Property: The Right Pricing Strategy
1. Dangers of Overpricing
a Property
Manan Choksi
Regional Director
RE/MAX Mumbai Gujarat Maharashtra
2. In the current market four elements must
be in place before you take a listing
• Motivated sellers
• The right price
• A long enough listing period
• A large enough commission rate
RE/MAX Mumbai Gujarat Maharashtra
3. Market cycle :
• Boom period : prices keep on rising, properties get sold in 3 months of
listing.
• Slowdown: prices keep on dropping, properties get sold in 12 months of
listing.
• Balanced period: prices are stable and properties are sold in 6 to 8 months.
• Right now our markets are in between complete
slowdown and a balanced period.
RE/MAX Mumbai Gujarat Maharashtra
4. Myths for Seller:
• If I list at a higher price, it will get sold at a higher price.
• If I list at a lower price, the seller will not buy thinking there is some
problem with the property.
• I need negotiation room so let me pad up my prices.
• Whatever price I list, I will be able to find a buyer in due course,
irrespective of the CMA
• I can sell late and suffer no financial loss.
RE/MAX Mumbai Gujarat Maharashtra
5. Overpricing listings works against your best
interests – and the sellers’. It leads to fewer
showings, showings but no contract, similar
homes selling for less and repeated negative
comments.
RE/MAX Mumbai Gujarat Maharashtra
6. Number 1 problem with overpricing:
• Today buyer searches property online.
• Over Priced property gets fewer number of viewing as buyers keep a
criteria to search.
• So if a 1 crore flat is put at 1.25 crore, and the buyer searches for flats
between 85 lakhs to 1 crore, this flat will not be shown.
• So there goes a lot of property inquiries.
RE/MAX Mumbai Gujarat Maharashtra
7. Number 2 problem with overpricing:
• The over priced property will be sold at a lower price than the market.
• As the market is getting slower by the day the same 1.25 crore
apartment (whose market value is 1 crore) will be sold for 95 lakhs
• This is due to various factors including:
• Impatience of the seller and the seller’s agent.
• Bad impression in the market that the property is on sale for long.
• General market slowdown
RE/MAX Mumbai Gujarat Maharashtra
8. Number 3 problem with overpricing:
• Loss of opportunity due to lack of liquidity.
• The seller would have some plan of investing money in another
property which may get sold
• Sometimes the dream house will get sold out
RE/MAX Mumbai Gujarat Maharashtra
9. Number 4 problem with overpricing:
• India has one of the highest interest rates today than it used to have in
the past.
• So once you have 1 crore flat sold 6 month late then @ 9% annual
interest you will lose 4.5 lakhs worth of interest income.
• More importantly you will sell the property eventually at 95 lakhs.
RE/MAX Mumbai Gujarat Maharashtra
10. Time Investment
• Those that are selling a home and list it too high will find that it may
linger on the market, which drags out the selling process.
• The longer a house is for sale, the more time must be invested with
showings, cleanings, and negotiations with potential buyers.
• This also means that a home will lose out on the newness factor that
often helps property on the market get sold.
RE/MAX Mumbai Gujarat Maharashtra
11. Less Chance Of A High Final Sell Price
• Overpriced homes do not generate as much interest in the market as
similar homes that are priced reasonably.
• For this reason, they tend to stay on the market longer. The longer a
home is on the market, the further down the price will go.
• This means that people that price their home too high initially will
often wind up getting below market value because the house has been
listed for such a long period of time.
RE/MAX Mumbai Gujarat Maharashtra
12. Brokers don’t take Exclusivity
• For an over priced property the agent doesn’t invest his resources to
the full extent
• Most brokers don’t take exclusivity for an over priced property
• Hence the owner has to do the leg work of promoting the property.
RE/MAX Mumbai Gujarat Maharashtra
13. Dangers of overpricing
• The right buyers won’t see it
• The higher priced buyers won’t want it
• Risk of falling market
• Tough to Close
• Low Ball offers
RE/MAX Mumbai Gujarat Maharashtra
14. The Advantages of Proper Pricing
•
Higher Net Sales
•
Attract Better Offers
•
Better Response from Advertising and Sign Calls
•
Faster Sale
•
Increased Agent Response
•
Avoid Your Home from Becoming
“Shopworn”
RE/MAX Mumbai Gujarat Maharashtra
15. A better strategy:
• In such a market some people “under” price the property.
• So for example the same 1 crore flat is listed at 95 lakhs.
• This results in to more interested buyers and we get a lot of inquiries.
• Then the customers don’t negotiate and openly mention that we have got a lot of
inquiries we are planning to sell at 1 crore.
• The key is to get a lot of offers, once you have that
you can increase the price to the buyer who is really
interested.
• Else just reject the offer!
RE/MAX Mumbai Gujarat Maharashtra
16. How to right price?
• Search online for comparative prices.
• Look for similar property deals in the recent past in the same area.
• Look for listing in classified advertisement
• Talk to a few agents as a buyer and to same agents at a seller – so you
can know the real price.
• Talk to a seller who has the nearest comparable property and
negotiate.
RE/MAX Mumbai Gujarat Maharashtra
17. In a nutshell:
• Nothing erodes the value of a property more than over pricing does.
• So take full care while pricing the property as it can make or break the
deal.
• Don’t over price.
RE/MAX Mumbai Gujarat Maharashtra