Property Report: Understanding the mindset behind property pricing strategy

When writing this article, I endeavour to use as the topic an example or discussion point that I, or our team, have experienced recently.

Something that comes up on a weekly basis is pricing properties and managing sellers’ expectations. I can’t write about this every month, but it is worth talking about again from the aspect of what happens in reality.

First comes the age-old battle of what the seller wants versus what the real market value is.

A prerequisite to this is the seller must trust the property practitioner to give the so-called accurate market appraisal.

This trust comes from the property practitioner’s track record, through their testimonials and recommendations and knowing that they represent an agency that values ongoing training and hiring property practitioners with integrity.

In other words, a property practitioner who is not trying to undervalue the property to make a quick sale for their own gain.

Assuming these requirements have been met, what do (or should) property practitioners consider when providing market appraisals? Obviously, I am not talking about the evident items like comparables, rands per square metre etc. Let’s assume we have all that, and we are now discussing pricing strategy and the mindsets behind that.

The first mindset and the reality are that the seller wants the very best price. If a property practitioner gives a truly realistic price, they run the risk of losing the mandate.

That is a fact. In fairness, sellers will often say they want a realistic price, but that generally comes with the caveat of as long as the realistic price meets their expectation and not necessarily what the market evidence backs up.

The second mindset is that the property practitioner also wants (or should want) to get the best price, or at least the right price for the property.

After all, we as property practitioners want to add value, and we are also acutely aware that property prices, over the history of time, inflate. We are not, for example, appraising secondhand cars.

So, with these two realities in mind, the pricing strategy that ensues is discussing a range usually between a quickish sale and best case, but still potentially achievable, scenario. Most sellers go for the best-case scenario, but quite a few do something else, and that is wanting to go on higher than that and this is where you run into problems.

Remember the best-case price is already flirting with that number that could be too high and where getting activity on the property might be in jeopardy. I always implore sellers not to go above that best-case price.

A seller might want to add fat into our best-case price, but they need to be aware that we have already done that and by going higher sellers are now just adding fat to the fat, which is clearly counterproductive.

If a seller is still convinced that the property practitioner has not accounted for the seller’s higher expectation, then they should ask this question.

“In all the property practitioners’ years of experience, how many properties do they know that have sold for higher than their valuation?”

I personally have been doing this for two decades, and I can easily say that I could count those times on one hand and I’m sure others would say something similar.

As long as you trust the property practitioner, then trust their price.

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