dangers of overpricing a property

Dangers of Overpricing a Property

Manan ChoksiRegional DirectorRE/MAX Mumbai Gujarat Maharashtra

RE/MAX Mumbai Gujarat Maharashtra

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


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.


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.


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.


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.


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


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


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.


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.


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.


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.


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


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”


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!


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.


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.


Thank you

dangers of overpricing a property

Real Estate