You're buying a car. You decide to buy it privately and conduct your research accordingly. After searching through the newspapers and on the internet for weeks, you find that most of the cars that you are interested in are priced in the $14,000 to $17,000 bracket. You're buying a car. You decide to buy it privately and conduct your research accordingly. After searching through the newspapers and on the internet for weeks, you find that most of the cars that you are interested in are priced in the $14,000 to $17,000 bracket.
You also find a car locally that matches your needs - but it has no price. You pay the guy selling that car a visit. You like it. It ticks all of the boxes. You ask the price. “It’s $20,000” he tells you. “It’s $20,000 because I’ve booked a holiday with my wife to Bali and we want to pay for it with the money we get for the car.” You look perplexed. This does not add up. How can the guy be factoring the price of his holiday into the sale price for the car?
Surprisingly, we encounter this sort of rationale quite often in real estate. Occasionally, people will refer to what they hope to do with the money – buy a car and so forth. Mostly though, people explain that they can’t accept this amount or that amount because they have spent so many dollars on the new bathroom, the new roof or the new kitchen. In other words, in their minds, cost must equal value.
Would you pay the $20,000 for the car in the above example?
I wouldn’t. The reason is simple. It doesn’t matter what the guy wants; what matters to me as a buyer is what I think the car is worth. And how do I make that decision? By comparing it to what else I can get for my money.
As sellers, it is very easy to lose sight of the fact that buyers do their homework before they buy property. If you price your property according to your needs instead of comparative market value, the chances are that it will still be sitting there long after the genuine buyers have gone.
Jamie Harrington (Director, Altus Real Estate)