Do you know your OIEOs from your POAs? Why setting the right marketing price for your property is vital.
Have you ever stopped to ask your estate agent exactly why they’ve decided to market your property at a particular price? Not the value itself necessarily (which should have been based on the current market and sales prices for similar properties in your area), but in the way they’ve presented the price? After all, when it comes to selling a property, setting the right price is crucial.
There is a very fine line between listing a house at the right and wrong price. One will help your property to attract lots of attention, which in turn will normally result in a large number of viewings. The other is likely to lead to deafening silence, so it’s very important to get the price right from the start. You’ll know very quickly if your estate agent has got it wrong by the lack of enquiries. If it has been set at the wrong price and your house begins to stagnate on the market, rest assured you will probably be asked to reduce the price to attract more viewings. Make no mistake; this can have a devastating effect on the property’s saleability – and your profit.
It is common, but not always advisable, for an asking price to be based simply on the figure you hope to achieve, plus a few thousand pounds added on for good measure, in the expectation that a potential buyer will haggle. Unfortunately, it usually results in the buyer offering a lower price than that stated.
The most common pricing strategies used are:
- An asking price
- A guide price
- An “Offers in Excess Of” price
- No price at all – “Price on Application”
Which approach you should take depends very much on your individual property at the time it is launched onto the market, so do not always assume that simply listing the house with a straightforward asking price is the best way to market your property.
If you choose to use an asking price, make sure it is set very close to the actual value of the property. Buyers aren’t fools and if you set an asking price 10-15% above the value, you will struggle to secure viewings, with buyers thinking from the outset that the property is above their price range.
A guide price on the other hand, presents more opportunity, offering the aspirational buyer a little more hope that they can afford the house. This style of pricing can take two forms:
1. A figure which is close to the value of the property, ie “guide price £500,000”
2. A price bracket i.e. “£480,000 – £520,000”
Be aware however, that a price range tends to encourage potential buyers to offer the lowest figure. By adding the words “guide price” rather than a price bracket, this gives the impression that sellers will accept offers either above or below this range.
Where the price of the property needs to visually compete with other properties in order to attract viewings and encourage potential buyers to fully appreciate what the property has to offer, the “Offers in Excess Of “ phrase can prove very effective – particularly if your home is validly priced higher than other neighbouring houses.
The “Offers in Excess Of” price is also useful in discouraging low offers. It ensures that the house shows up in online property search engine results up to and including the given figure, whilst making it clear from the start that offers any lower than this won’t be considered.
“Price on Application” tends to be used for properties at the higher end of the market. This can sometimes be a good approach for properties where the level of demand is expected to be less than usual, perhaps due to a very high price. Its main purpose is to entice interested parties into contacting the estate agent to ask the price, which allows the agent to begin a conversation with them and encourage them to view the property.
On the other hand, if you have a house with a value of £500,000, and market it at £600,000, you will receive little interest and any viewers will quickly decide that it doesn’t appear to offer good value, compared to other £600,000 houses on the market.
This article was written for The London Economic Property section, CLICK HERE