Sellers who persist in adopting the dropdown strategy - inflating the asking price and then negotiating down to the price actually desired - may just as well put a 'Not for Sale' sign on the pavement.
This is according to Ronald Ennik, CEO of Christie's-affiliated Ennik Estates, who says that sellers who price their homes realistically may well be pleasantly surprised by the outcome.
"This strategy simply does not work - particularly in current market conditions, and most definitely at the luxury end. Buyers 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," says Ennik.
"At worst, it is a strategy that could, in fact, cause the property to be sold below its true market value," he adds. "Ennik Estates has just sold for R6 million a house priced and advertised at a market-related R5,9 million. While exceeding asking price in this market may seem exceptional, the sale was closed because the seller's price was not only realistic, but, more important, was seen to be realistic."
House stays longer on the market
He warns that overpriced homes do not attract enough show day traffic - and visitors that do show up are more often than not the wrong buyers for the house.
"Another disadvantage of dropdown pricing is that it extends the time the house is on the market, thus creating the need for more show days, which is not only inconvenient to the seller but also has cost implications. In addition, it creates the risk of over-exposure of the home, and makes competing properties look more attractive," says Ennik.
"Hopefully, South Africa will soon line up with home markets internationally - particularly in the UK, Europe and USA - where, with the support of the increasing amount of online data available to buyers, the gap between asking and selling prices has virtually converged," he concludes.
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