Property Pricing

To set the listing price for your property you first need to discern the market value of the property. Once you have obtained the market value of your property the listing price can be established by taking into consideration your personal requirements such as time frame and financial return needed along with what similar properties are listed for.

It is perceived throughout the real estate industry that only real estate agents can accurately estimate the market value of a property. Owners are led to believe that sophisticated mathematical calculations and specialised inside knowledge is necessary to determine the market value of a property. However, all real estate agents do to determine the market value of a property is a simple Comparable Market Analysis (CMA).

A CMA is the comparison of similar properties which have been sold or are listed on the market in a particular suburb. Real estate agents usually get this data (known as Property Reports) from online real estate data websites. You don’t need to be a real estate agent to perform CMA, it is easy and can be complete in approximately 20 minutes by performing some simple research over the internet.

Comparative Market Analysis
There are three steps involved in performing a CMA for your property. Before you perform these steps however, you need to print our Property Pricing Form. This form is used to compare the positive features you recognized in your property appraisal to those features of similar properties which have sold and are listed for sale in your suburb. You need a copy of your completed Property Appraisal Form. Enter the positive details from your Property Appraisal Form into the section titled “Your Property” found in the Property Pricing Form

Step 1
Search Privatepoint or Househunter (alternatively use Domain or REA) for three properties in your suburb which have been sold recently, preferably in the last 2 months and are similar in general features (number of bedrooms, bathrooms, age and size) to your property. Enter all of the positive features for each of these properties into the Property Pricing Form, as you did earlier for your property.

You must now analyse each of these properties and decide whether your property would sell for more or less than what they sold for. Now, you then need to write an amount in the box for what price you believe your property will sell in comparison to the recently sold property. Once you have completed this for three properties you will have an estimated market value range in which your property should be valued.

If the range you calculated above is too broad, look for 2 more properties similar to your property which have recently sold and perform the same analysis as before. Compare all five properties to discern a market value range for your property. To calculate an average market value price sum up all the prices you have estimated and divide the total by the number of properties you used for your estimate.

Step 2
The analysis performed in Step 1 gave you the market value (what the market will pay) for your property, you now need to determine the listing range for your property. This can be done by performing the same analysis as above but this time using similar properties currently listed for sale in your suburb (as opposed to properties that have been sold). This analysis will give you a listing range which your property should be listed between.

Step 3
You now have a range for the market value and listing price for your property. You need to select what you think the most appropriate market value for your property is (the average market value is usually an accurate estimate). Once you have the market value you then need to establish a listing price by taking into consideration the estimated listing range, your time frame requirements and the financial return you need from the sale.

Click here to see an example of CMA for a property which is being listed for sale.

Note: Most properties are priced at between 10 to 15% greater than their market value as it is expected that potential buyers will make an offer which is approximately 15% less than what the property is listed for. To make sure the owner has enough room to negotiate with a buyer often the listing price is greater than the market value. Alternatively, some owners prefer to sell their property as fast as possible so they set the listing price equal to or just below the market value.

In comparing properties and developing a market value and listing range you should consider the following points;
Similarity– You can demand a premium for your property if it is unique and there are no other similar properties on the market.
Desirability – A property which has features which are currently desired by the marketplace will command a greater price.
Location – If your property is located in a popular suburb or area then you can command a greater price for the location..
Extras – A property with an extra bedroom, bathroom, floor, garage etc will always command a higher price then a smaller or standard property.
Maintenance – A property which appears to be well maintained will always command a greater price than a similar property which has been neglected.

Disclaimer: All information provided in this blog does not come with any guarantee in relation to its accuracy. This is our opinion in relation to issues relating to the real estate industry. Privatepoint or its employees will not be help liable for any liabilities, expenses, losses, damages or costs, that may be incurred by you or a third party as a result of or in connexion with use of this information.