HOW TO PRICE YOUR PROPERTY TO SELL
One of the most important factors, if not the most, when you decide to sell your property is to price it correctly.
Every seller wants to sell at the highest possible price, and every buyer wants to buy at the lowest.
You can set any sales price you want, but the market determines the value.
Setting Your Price Too High
Many sellers want to start with a high price, sometimes unrealistically, because they don’t want to lose out if potential buyers are willing to pay. In a seller’s market, expectations are understandably high.
The danger, however, is that over-pricing your property can lead to over-exposure. The freshness of the listing generally wanes after the first two to three weeks. Buyers may be wondering if there is something wrong with the property if it is still on the market after several months.
You may choose to drop the price as time goes by, but it can send a wrong signal to buyers who have been following your listing. They may wait and see how low you will go down eventually or take the opportunity to give low-ball offers to test the sellers.
Setting the price high with a view to lowering it over time is not a good sales strategy.
One key factor in setting the property price is how motivated are the sellers. If there is no urgency in selling, sellers may want to test the market with an unrealistic high price tag, and it may end up with no viewers or some curious viewers.
If they plan to upgrade or downsize, they usually sell-high-buy-high, and the converse is true unless the market quickly turns around. In this kind of situation, it is imperative to set the correct pricing so that the sellers can move on with their plans.
Setting Your Price Too Low
Conversely, setting the price too low will attract many buyers, but sellers might be worried that they are shortchanged. Or buyers might be wondering why it is so cheap. Could something be wrong with the house, or could it be a loan-shark case?
On the positive side, low pricing will likely attract many viewers and result in multiple offers. An experienced property agent will use this strong interest to create a lot of hype.
I had a few cases where buyers tried to outbid each other, thus driving up the sales price. Eventually, the seller got higher than what he wanted!
Determining The Market Value
You should engage an experienced property agent who knows how to use comparative market analysis (CMA) to help you determine the market value. Once that is established, he can also help plan a pricing strategy to sell your property at the fastest time at the highest price.
So how do we determine the market value?
The first step is to check with the bankers for an indicative valuation. Every bank has its panels of valuers, so the valuations can vary across banks. Hence, it is good to check with a few local and foreign banks. The banks may stretch their valuation up to a limit to match the asking price.
If bank valuation cannot match the sales price, it may put a cap on the buyers’ offer price because they have limited cash reserves. Even if they can afford it, they may not be willing to pay too much above the ‘fair’ market price.
For HDB flats, valuation is done by HDB valuers after the sellers have issued the Option to Purchase (OTP). By looking at the transaction history, agents can assess if the sales price will likely incur any cash-over-valuation (COV).
While sellers are delighted with the high sales price, they run the risk of buyers not exercising their options if the COV amount is too high. The maximum $1,000 option fee (unlike 1% for private property) is not enough to deter them from giving up the property. That will result in three weeks of opportunity cost for the sellers till the option lapses before looking for another buyer.
Looking Into More Details
Banks’ indicative valuations are desktop valuations (not based on on-site property inspections) that have some shortcomings because they don’t consider every factor.
Essential factors such as facing, level, and layout are overlooked.
Some projects come with so many types of configurations and facings. To put them all on an equal footing does not do justice to each house.
Take, for instance, Reflections at Keppel Bay. It has high-rise tower blocks, some with balconies while most don’t. Some have big columns in the living rooms. The low-rise villa blocks have balconies with units facing the golf course, canal or the sea, and the latter is the most premium.
When I was marketing a premium villa unit with rare sea and golf course facings, buyers often used generic transacted prices as a gauge. The gaps in these prices were huge, and invariably, buyers would use the lowest prices to negotiate. I then decided to sort out the past year’s transactions based on different blocks and facings. I highlighted those with sea-facing, and it became clear they are higher in value than those facing the golf course and canal. The developer’s launched prices for these units were also higher. Eventually, the apartment was sold to a discerning buyer at a fair market value.
There are always exceptional cases. Such as very high-floor units with spectacular panoramic views, highly sought-after enclaves or award-winning projects (e.g. The Pinnacle and Skyville@Dawson).
Recently, I sold a five-year-old 3-room HDB flat in Yishun at a record price (the last check shows the record still stands) with a massive $70k cash-over-valuation. The flat was in pristine turnkey condition with the best facing in the block.
Not all condos in the same development and HDB flats in the same blocks are made equal.
Penthouses, Ground Floor and Double Volume Ceiling Units
If you own any of these condo types, assessing their values is not so straightforward. On paper, they appear very spacious in terms of square footage, but you can’t value them like any typical unit.
Penthouses generally have massive open roof terraces; ground floor units with private enclosed space (PES). Others come with double volume ceilings where the air space is part of the ‘floor area’. The liveable space of these condo types often falls short of expectations.
Lack of Transaction Data
Another shortcoming of solely dependent on the bank’s indicative valuation is where there is a lack of transactions which usually happens in smaller developments.
When I was marketing a condo in the 104-unit Jervois Lodge, I found out that there had been no transactions in almost two years. The banks’ valuation fell short because they relied on two-year-old transactions when the property market had appreciated by about 10 percent.
In this case, I have to use nearby developments to assess the unit’s value and consider the overall growth percentage of the neighbourhood over the two years.
As a side note, if you are buying an investment property, it is not advisable to go for small developments with minimal movement in sales.
Buyers these days are very savvy. With data so readily available online, they will do their homework to assess the value of the property.
Transaction history is a good guide. But if one relies solely on the data on URA website, the information is very bare because they do not show the unit numbers. Without knowing the level and facing of the unit, you can’t compare apple with apple as I have highlighted earlier on, using the example of Reflections on Keppel Bay.
Agents usually subscribe to portals such as Edgeprop and SRX, which gives detailed and real-time information. At Huttons, our proprietary app, Analyzer, provides a host of information which offer valuable insights into every property. With all these tools, we can assist our clients in finding out the true worth of their property.
Transaction data is only one part of the story. An experienced agent will use his market knowledge to advise the seller on the optimal pricing, helping him get the best sales price.
Look at Your Competitors' Pricing
Another essential step besides checking on recent transactions is to look at comparable listings.
If you price your property much higher than your competitors, you might not receive any calls. The typical consumer behaviour is to start with the cheapest, and you are inadvertently helping your competitors sell theirs faster.
Some may still view it out of curiosity, with a parting question, “Do you know there is another unit with a much lower asking price? Why is your price so high?”
Pricing your property at fair market value will enable you to sell your property quickly. You can markup your price a little when it’s a seller’s market.
If your property is the only one on the market for the development and is in a highly sought-after location, then you have a further advantage.
A buyer came to view my listing in Merasaga a few years ago, and he made the offer on the spot based on the asking price. He told me he had been waiting to buy a unit there for two years, but no one was selling. Rarity is your best weapon.
Enhance the Value of Your Property
Creating a positive first impression will help sell faster and secure a better price.
There are a few things that the agent can advise the seller to do:
- Give a fresh coat of paint, ideally with neutral colours.
- Minor repairs: broken lights, leaking tap, cracks, etc.
- Decluttering. Keep the house as clean and tidy as possible.
- Home staging. Not every buyer can visualise the potential of an empty house.
These enhancements will involve some costs but are worthwhile. If your buyer falls in love at first sight of your house, you get the deal at the price you want!
Finding out the worth of a property and devising a pricing strategy is not always straightforward. It is best to leave them in the hands of an experienced and knowledgeable agent to help you work through the process.
If you have any questions or need to discuss this topic further, drop me a note.
Danny Han is a licensed property agent since 2005.
As a kampong (village) boy growing up in Holland Village, he has so many fond memories. He grew up with pigsty (yuk!), cemetery, swamp and communal-living (with 10 families under one roof). His childhood games were gasing (spinning top), marbles, kites, spider-fighting and tree-climbing. An open-air cinema was his source of entertainment. 7th-month Hungry Ghost wayang (Chinese opera) and getai (concert) was a once-a-year event that brought the entire village together.
What Danny is passionate about is not just about showing clients properties around Holland Village, but also enjoys sharing anecdotes and nuggets of information that are part of his growing up years.
Danny is an avid hiker and passionate foodie. He has covered most of the nature trails in Singapore, including some that are off the beaten track. Living up to his motto, “walk to eat,” he enjoys going out with his wife, a retired academician, on a food hunt across the island. He also has some foodie kakis who mix work with food. They then share their gastronomic experiences through food blogs. So do watch out, because every time he shows you a property, he will tell you what is the best food nearby!
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