Whether you’re selling to the public via a traditional agent or you’re selling a deal to investors, it’s generally not a good idea to inflate your asking price.
Here we’ll look at why that’s the case in general and then we’ll look at this in more depth should investors be your target market.
Overpriced properties take longer to sell, it’s as simple as that.
This is especially true if you’re selling a home that needs work. If someone is looking for a ‘project’ to add value to or to make their house their own, they want to see a profit on the other side. If your property is going to be worth £250,000 after renovation and requires £25,000 spending on the improvement, pricing the property at £225,000 isn’t going to get the job done.
When people search for properties they typically search within a price range. You might think pricing your home at £160,000 gives you some wiggle room if you want to secure a sale for £145,000 but bear in mind that you suddenly lose the attention of every buyer who is only searching for properties below £150,000.
Stamp Duty is a vital consideration too. A first-time buyer on a tight budget isn’t going to spend over £125,000 and get hit by Stamp Duty if they can find a similar property under the threshold. The same ethos applies as you go up the ladder.
It’s also important to note that the SDLT rates are different if you’re a landlord buying additional properties that aren’t going to be your main residence. In this case, Stamp Duty applies to all purchases over £40,000 at the following rates (at time of writing):
If you’re searching for a property in a specific area with a specific criteria in mind you know which ones have been on the market for a while.
This is when the strategy of pricing high initially and ‘testing the water’ can come back to bite you. You get no interest and slowly lower the price, only to find that there’s still little interest.
That’s because it’s human nature to question why. What’s wrong with the property that’s left it on the market for so long and then forced them to keep lowering the price?
If you were an agent would you invest your resources selling the properties that are likely to sell or those that are overpriced?
Even if a buyer loves your property and proceeds at the high price, their mortgage lender will conduct a valuation or a more in-depth survey that will look at the property’s true value. If this is less than the agreed sale price the buyer may need to come up with the extra cash themselves to satisfy the lender, or worse, they may need to pull out of the deal, costing you time and money.
If you’re selling to investors, either in the open market or through a specialist site like Property Deal Store, overpricing property becomes an even bigger issue. Investors are professionals and will do their due diligence. Not only that, these people are looking for a deal – property is their business.
If you overprice your deals not only will you struggle to sell them, you’ll also miss out on all this…
How can an investor trust you enough to work with you again in the future if you overpriced the first deal that they came across. Not only will you miss out on the first sale but also potentially a lot of repeat business.
Investors talk to each other. Turn this into a positive by making sure they say good things about you as a sourcer.
Generally, it’s a better strategy when building your sourcing business to make a good profit quickly and then move on to sourcing your next deal. Not positioning deals so that you can make slightly more each time but with each deal taking an age to sell.
If you’re moving along at pace by providing high quality deals at the right price then you’ll be in a better position to amend your strategy slightly as changes in the market happen, such as new legislations or changes in tenant behaviour.
Whether you’re simply looking to sell your home or build a life-changing property sourcing business, one thing’s for sure – it pays to price your properties correctly and take advantage of all the opportunity that can come with.
You’ve only got one chance to make a first impression, and in property, speed matters.
-Janice Minihan, director and co-founder of Property Deal Store
For more information on building a property sourcing business, have a look at our guide here – How to Become a Property Sourcer
Then, when you’ve got your first deal together, here’s how you get it listed for free on Property Deal Store! – Listing Your Deal: The Sourcer’s Guide