Value and marketability are key concepts in the property investment field. You need to know the difference between value and marketability to ensure you are maximising on both and that the property sells for the best possible price. The complementary relationship between these concepts will guarantee a successful sale for your customers.
Value
According to Berry Everitt, MD of Chas Everitt International Property Group, “value is about price, in comparison with similar properties that are on the market in the same area at the same time”. “Homebuyers are comparative shoppers, and it is essential that the agent understands the direction of his local market at any particular time and can advise his client accordingly, in conjunction with the latest comparative market analysis (CMA) sales statistics.
“If prices in the area are trending downwards because there are more homes for sale than buyers, the seller who wants to attract the most possible interest and achieve a quick sale will need to set his asking price slightly lower than the latest sales prices recorded in the CMA. And, of course, the opposite is also true, but the keys here are really up-to-date information and knowledge about how to apply it.”
Electronic media and digital information have changed how we do business at a fundamental level and have created modern, tech-savvy consumers who have a wealth of information at their fingertips via mobile phones, computers and tablets. Searching online has become the easiest and fastest way to find properties to buy. Almost every site offers tools for comparing prices, features and neighbourhoods.
How does this equate to determining the value of a property? Says Meyer de Waal, director of Oosthuizen & Co, “Property search engines list multiple properties for sale, and prospective home buyers will be able to filter the area, price and specifications of many properties, most often before they contact an estate agent to identify their best selection to view, with the intent to buy.
“Sellers of properties must thus think like buyers and the estate agents must assist sellers in achieving the best price while selling the property within a reasonable timeframe.
“Buyers are aware that they do not want to pay more than the average market price of a property. That is why many service providers offer a CMA service. The CMA provides information about properties sold in the neighbourhood, recent prices achieved and general information about the property, to compare apples with apples. The CMA also provides information related to an estimation of the property’s current worth, price trends, recent sales, deeds office and surveyor-general information, the municipal valuation of the property, suburb trends, owner information, selling history, transfer history and aerial and map views.
“Estate agents worth their salt (and professional fee) will, however, not accept the CMA valuation and will always try to sell the property for more. The estate agent must use his or her professional skill, years of experience and industry know-how to raise the asking price to such a level that it is in between a price that will not achieve a sale and the CMA valuation. If every seller accepted a price in line with the CMA, the property market would stagnate.
“Estate agents should try to stretch the purchase price to just before the breaking point, and then trim the price down from there.”
Once the value has been determined through a thorough CMA, it is time to move on to the marketability of a property, as both are needed in order to sell the property for the maximum price within a reasonable time frame.
Marketability
So what is marketability? Says Herschel Jawitz, CEO of Jawitz Properties, “Post the financial crisis, buyers – even those at the upper end of the market – have been focusing on value, which is the combination of price, position and size. Buyers will look at different houses in different areas to see what they can get and for how much. Homes in good areas but that are less exclusive than more expensive areas will offer bigger land, more accommodation, a better home or a combination of all three, compared with a similar home in a more expensive area for the same price or even a lower price.
“We have even seen those trends in the more upmarket areas where, traditionally, buyers focus only on the ‘old’ property mantra of ‘position, position, position’. The first-time-buyer market is always driven by value, where buyers will look outside the more expensive suburbs in order to be able to get into the market.
“Marketability includes the concept of value but also talks to the presentation and the condition of the home: how does it present to the buying public? As agents we have to focus on both value and marketability, not only for the house that we are selling, but also compared to other similar homes in the area.
“Homes that are overpriced relative to the competition – other similar homes for sale – tend to be used by agents as a basis for selling the homes that offer better value. The challenge is to help sellers understand this concept of value and what drives the decision by a buyer to buy one house and not another.”
According to Steve van Wyk, MD of Seeff Centurion, when you are looking at determining marketability you need to ask the following questions:
1. Is the property priced correctly?
2. Is there a demand for property in that area?
3. Is the property in a saleable state compared with similar properties?
The condition of the property is paramount to the value, and this is where marketability and value work hand in hand. How ready is the property to sell, and what can you do as an estate agent to ensure that the marketability of the property helps the value and increases the chances of the property selling?
A property that is clean, neat and has been well maintained is a property that is marketable. It is appealing to prospective buyers, and will in turn help the property to sell in a reasonable time frame.
There are many tips and tricks to increasing marketability, from really small things – such as a fresh coat of paint, a landscaped garden and a clean outside wall with a visible property number – to more in-depth measures, such as painting the inside of the house, steam-cleaning carpets, ensuring all the lights work and have fresh light bulbs and ensuring all the plug points work, to fixing any stains or damage to the walls. You don’t have to alter the physical features of the property to increase its marketability.
Says Adrian Goslett, CEO of RE/MAX of Southern Africa, “Marketability is often the reason why properties are listed in spring, as their gardens look more pleasing when the flowers are in bloom.
“Staging the property will also have an impact on its saleability. It is advisable to de-clutter the home but keep it furnished. An empty home will make it potentially difficult for buyers to see themselves living there. An experienced real estate agent will be able to provide valuable advice regarding staging the home and making it more appealing on show days.”
While there is a distinction between value and marketability, in order to achieve the best selling price for a property and sell it within a good turnaround time, you need to make sure that value and marketability work hand in hand for a favourable outcome. Neither is more important than the other. Without a competitive value and correct CMA of the property, you may arrive at a value that hinders its sale. In much the same way, marketability ensures that the property is seen by the right people in the best possible way and encourages buyers to buy at the best possible price.
Property Statistics
According to PropStats, properties priced for less than R10-million (captured in November 2014) sold in 85 days on average and achieved 5.8% less than the asking price – an improvement on the November 2013 stats of 86 days at 6.8% less than asking price.
Properties priced at more than R10-million (captured in November 2014) sold in 170 days on average and achieved 12.4% less than the asking price, while in November 2013 properties captured sold in 95 days on average at 12.2% less than the asking price.
Although properties took longer to sell, more than double the number of properties sold for more than R10-million in 2014 as compared with 2013.
Words: Angelique Redmond
