Wetag Consulting: It's the price that sells the house!

by Ueli Schnorf co-owner of Wetag Consulting

«Alain Pinel, the legendary Californian real estate guru, responded as follows: “There is a general rule in real estate that the wisest professionals keep reminding themselves when they have to price a new object on the market: if a property exceeds the perceived market value by even 5%, the seller loses half of the potential buyers, if the price set exceeds the market price by 10%, the chances of selling are reduced by 70%. This is especially visible in the luxury sector”.

The first question a private seller should ask themselves is: do I really want to sell or just see what market interest my property has? In the latter case, you can set any price you like; in the former, you can set a price that will attract the greatest number of buyers in a reasonable amount of time, securing a sale at the best price. If you ask a real estate agent for advice, you need to determine whether they're looking to sell your home or primarily "buy" your business. It's easy to secure a mandate by telling sellers that their home is worth much more than other agents recommend, but obviously, leaving aside the ethical question, this approach doesn't lead to any results and doesn't answer our question: how do you set the right price?

Approximate and unusable ratings

"We know today that there are a lot of companies that promise free property valuations in ten seconds. These are companies that collect your data and then sell it to large companies and the estimate offered has no value. If we really want to calculate the value of a property we need to know that there are three pricing strategies: the perceived "market value" based on relevant comparisons, the slightly or significantly lower one used to create maximum interest (fashionable in difficult times) or the high one, used by those who have the time to wait."

A vision that is hardly objective

Our experience shows that more than half of homeowners significantly overestimate the value of their property, and there are many reasons for this. The statement "I paid that much for it myself" doesn't mean the property is worth that much on the market. When we hear "the neighbor recently sold it for x francs ," it may be true, but often it isn't. "My location is the best and you can't find anything like it these days," or "no one else has a view like mine," may be true in the homeowner's eyes, but it may also not correspond to reality. Another phrase we often hear is "all similar properties are this price," but if we compare these properties, we realize they are very different.

The real value almost never corresponds to the commercial value

Apartments, especially newly built ones, are easy to compare in terms of price, while it's often difficult to compare the prices of single-family homes or luxury properties. Banks or architects will give you loan -to-value or real estate prices, but these often have little to do with real estate market values. In this general indecision, owners, to have some leeway in negotiating, add 10% to the selling price. This reasoning almost never works. A price that's too high discourages potential buyers, at least until the price is drastically reduced. A price reduction, regardless of its size or timing, is an emotionally charged moment. So much so that when the moment finally arrives, it's often too little, too late. In any case, a reduction always serves to revitalize a property, and, as mentioned, the timing and extent of the reduction are crucial to the success of the sale.

The market dictates the law

The timing of any price reduction must take into account the current state of the market segment in which the property is being offered. In a very hot market, this can happen after just a few weeks; in a very slow market, it may only happen after six months or a year. The magnitude must also be considered: a price reduction must be significant enough to restart the marketing engine . Furthermore, it's important to consider how many new properties have come onto the market in the meantime, because these are fresh properties, while properties with price reductions often give the impression of "finally something is moving here, let's wait and see." For this reason, a price reduction must be competitive with new properties for sale.

Conclusion

Setting the right price, which is crucial to sales success, is therefore a matter of experience that must be approached in the most informed and, where possible, non-emotional manner . Experience shows that the more conservative and reasonable the initial list price, the better the final result.

Remember that in most cases it is the buyer who sets the market price, not the seller. The more potential buyers there are, the better you will be able to correctly evaluate their behavior. The advice is always to turn to professionals in the sector.