When selling a property you obviously want to get the best price available and to conclude a deal as quickly as possible. Trying to find a balance between the best price and the quickest deal is not always easy and while many people initially tend to overprice their property, with the idea of reducing the price at a later date, this strategy could be fraught with danger.
We will now take a look at some of the issues you need to be aware of when deliberately overpricing your property as you attempt to get the best price possible.
Windows of opportunity
If you are looking for property the chances are those “new properties” just listed will catch your attention before those which have been available for some time. This “window of opportunity” is strongest when a property is initially advertised for sale as this will attract the greatest number of potential buyers. It is therefore obvious to assume that if you have overpriced your property, compared to others in the region, there is the potential to miss out on a quick sale.
The affordability factor
It stands to reason that the lower the price the more potential buyers you will attract, simply because of the affordability factor. There is obviously a need to obtain the highest price possible while attracting as many would-be buyers as you can – balancing both factors. This particular issue will vary in influence from area to area because for example if you have a relatively expensive property in a relatively lucrative neighbourhood then it would only take a handful of potential buyers to create the competition needed to close the deal.
However, if you were at the higher end of your price bracket in a relatively less well-off area then this would significantly reduce your potential pool of buyers. Sounds simple?
One factors which often comes into play when selling a property is the actual motivation and the determination of the seller. The motivation of the seller can be infectious but if you are asking a relatively high price for your property, compared to similar assets in the region, be prepared for potential buyers to walk away. Put in simple terms; if a similar property is priced at a “more realistic level” then why would a potential buyer waste time haggling with someone who has listed their property in the higher price bracket?
If you are able to justify the relatively high price you may be able to close a deal but by looking towards the higher end of the scale there are dangers.
Reducing your price at a later date
Property markets can turn either way relatively quickly and many people who have looked towards the higher end of the price scale when selling their property have been left high and dry when the market turned. We all know that the longer a property is for sale the more sceptical people become and the more downward price pressure. Very often those who have tried a higher price in the early stages of the selling process will be forced to reduce this at a later date to a potentially “below-market rate”.
Fear and greed rule all investment markets and it is no different in the property arena – be careful.