The "price reduced" tag - what it really means for buyers and sellers

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However, according to Schalk van der Merwe, franchisee for the Rawson Properties Helderberg Group, a “price reduced” tag doesn’t always mean what people think.

Not always a case of desperation

“There’s a lot of negativity surrounding price adjustments on property listings,” says Van der Merwe. “People assume that if a property price is reduced, it’s because the seller is getting desperate. There are situations in which that may be true, but it certainly isn’t always the case, and it’s very useful for buyers and sellers to understand all the factors that could be at work behind the scenes.”

From the seller’s perspective, Van der Merwe acknowledges that it’s always preferable to list at the perfect price from day one, but says this can be difficult when balancing expectations with fluctuating market conditions.

“If we look at Cape Town property a year ago, homes were selling in 14 days on average,” he says. “Now, some listings sit for 60 to 90 days before selling, and attract offers between 5% and 20% below asking price. An experienced agent with access to comprehensive current and historical data, and on-the-ground knowledge of your specific neighbourhood, will still be able to accurately price your home for sale, despite these changes. These recommendations don’t always coincide with seller expectations, though, and negotiations can lead to listings being initially overpriced.”

Ideally, Van der Merwe says sellers should receive very clear and detailed reasoning for the price recommendation their agent provides. This should include details on the competition, a positioning strategy (high, competitive or aggressive for a quick sale) and activity expectations for weekly viewings and time on the market.

“It should be very obvious to the seller where their property fits into the market and what they can expect from the sales process,” says Van der Merwe. “This information also needs to be updated by the agent on an ongoing basis so that sellers can make informed decisions if their listing is not performing as expected.”

All not lost

If this does occur, Van der Merwe reassures sellers that all is not lost. Recovery is simply a matter of assessing why a listing is underperforming, and adjusting its positioning by the correct amount.

“This process is a lot more effective when your agent is backed by a team of support staff who are actively monitoring both online and in-person activity,” he says. “If online viewings are high, but aren’t translating into actual enquiries, for example, it’s a good indication that the price has been set too high. Adjusting to a more competitive price doesn’t mean you’ve failed or your home is unwanted. It’s a sign that you understand the market and are serious about a sale.”

This, Van der Merwe says, is a valuable lesson for buyers to learn as well.

"Price reduced" not automatically a bargain

“You should never assume a ‘price reduced’ property is automatically a bargain,” he says, “but you can take it as a good sign that the seller is more than just testing the market. Buyers still need to do their due diligence to make sure they’re getting value for money, but they also need to be prepared to make a quick decision if the property has been accurately priced to sell.”

Whether you’re on the buying or selling end of the “price reduced” tag, Van der Merwe says the key to good choices is always information.

“Buyers and sellers both need to take full advantage of their agents,” he says. “Ask questions, get supporting information, make sure you understand exactly what they’re recommending and why. If they don’t have answers for you, or you’re not satisfied with their reasoning, it may be time to look for a different team.”