Property Pricing for Real Estate Private Sales

Sell your property privately with no agent and no commission through the private selling real estate website Privatepoint.

Real estate private sellers often set a selling a price which is well above the market value of their property. It appears that some real estate private sellers think because they are not using a real estate agent they can demand a higher price for their property. More often than not, this is the reason they receive minimal enquiries for the property and evidently why their property does not sell.

I have previously written articles about setting the listing price of your property and also discussed what is know as Comparative Market Analysis which is the best method to determine the market value and listing price for a property. Further to these articles I believe private sellers should discount their property below the market value to highlight the commissions they are saving by not using a real estate agent. You might think I am crazy but I urge you to continue reading to understand my reasoning behind my model.

Lets use Domain.com.au as an example as this website allows private sellers to list their real estate. Probably around 99% of the real estate on Domain are properties which are listed through real estate agents and the remaining 1% are private sellers. As an example lets assume I have a property I would like to sell privately and it is in Wagga Wagga. It is a house and other similar houses which are listed with agents are for sale for between $490,000 and $510,000 so lets assume that a fair market value for this property and other similar properties is $500,000.

Now, all property owners who are using a real estate agent are likely to have to pay around 3% sales commission to the agent once they sell the property, so around $15,000. Let’s say they sell the property for their asking price of $500,000 so the price after commission is $485,000.

In my opinion property owners who have chosen to sell privately should list the price below the market value at $492,500 representing a $7,500 discount on the market value. If they then sell the property for the listing price of $492,500 then they are $7,500 better of than what they would be by selling through an agent.

In theory all properties advertised by private sellers on Domain should be priced less than similar properties listed through an agent. What should then happen is that properties listed privately on Domain will become more attractive to property buyers and almost all privately listed properties on Domain should be sold before properties listed through real estate agents.

Here are some very important points about this pricing model.

• More Profit for the Property Owner – Although the selling price is lower than what you would achieve with an agent the net profit from the sale is $492,500 rather than $485,000 which could be achieved through a real estate agent.
• Lower Purchaser Price for the Buyer – The purchaser is buying the house for $492,500 rather than $500,000 a saving to them of $7,500.
• Property Priced Below Market Value – The property will be priced below market value and will be more attractive to potential purchasers meaning it will sell quicker than other properties listed on Domain through real estate agents.
• Real Estate Agents will Reduce Commissions – If this pricing model was used correctly it would results in real estate agent commissions reducing because their properties would only sell after all privately listed properties sold.

This pricing model is mathematically and fundamentally sound and works in theory but very randomly works in practice. The reason you never see it in practice is because private sellers almost never list their property at a discount to the market value and most cases list their property at a premium to other similar real estate on the market. Some private sellers are too greedy and what the best price for their property. This is fine but to do this you need to compete against real estate agents, all of their resources including databases of buyers, networks and extensive marketing reach. Not to mention that trying to get the best price could mean you property sits on the market for an extended period of time.

The simple solution is to price your property using the method I have outlined above and it will sell a lot quickly than any other property and the net proceeds will be greater. A win win for property sellers and purchasers and a loss for real estate agents.