“Price discomfort” the norm in current market

In the prevailing climate of low growth in house prices (in real terms), top-end home sales are almost invariably being settled at a price level of slight discomfort for both seller and buyer.

Today’s digital age of instant access to information ensures that buyers and sellers alike are aware of prevailing home values. They are au fait with market trends and lifestyle attractions – or detractions – of the neighbourhoods in which they wish to buy or sell.

Inevitably, buyers will believe they can secure bargains. Sellers, on the other hand, have inflated expectations. As a result, deals are often struck at prices that are uncomfortable for both parties.

For example…

A typical transaction would play out as follows:

The seller knows the true market value of the property but will up the asking price by 10%. The buyer on the other hand, is equally aware of the market value but will pitch the offer at 10% below the requested price.

The difference between the two prices is finally eroded by negotiation to a point of settlement at which neither feels 100% happy.

For instance, a genuine R10-million house is offered at R11,5-million. It is finally sold at R9,2-million. The seller’s perception is that he or she has taken only a roughly 10% knock. The buyer, who was budgeting R8,5-million, feels the same way at the other end of the equation.

Avoid “dropdown” price marketing

Meanwhile, sellers who persist in adopting a “dropdown” strategy – inflating the asking price and then negotiating down to the price desired – may just as well put a ‘not for sale’ sign on the pavement.

It simply does not work – particularly in current market conditions, and most definitely not at the luxury end. Buyers of prime property are well informed. They have access to market indicators and other data. They know true value when they see it, and will pay the price if they like what they see.

At worst, it is a strategy that could, in fact, cause the property to be sold below its true market value.