Get Your Price Right or Pay the Price

Disclaimer: This information is intended to be of a general nature. Please do not rely on any of the content as being a professional tax or legal opinion and seek your own independent advice.

Emotional attachment often lead home owners to believe their property is worth more than a market consensus of a fair price. Opinion of market value for property is largely a subjective exercise; various agents will have differing views of market price, friends, lovers and others have their own opinions as does the property owner.

Given the difficulty in accurately determining fair market price prior to the actual sale taking place, a definition of “value” arises from the ratio decidenti of a famous case;

“The market value of land at a certain date may be defined as the amount of money the land would bring in the open market by voluntary bargaining between vendor and purchaser, both willing to trade but neither of them so anxious to do so, that he would overlook any ordinary business consideration.” Spencer v Commonwealth of Australia [1907] HCA70; (1907) 5 CLR 418. 


It follows then that the value of your property is not actually determined until your buyer is found, negotiations finalised and the contract for sale completed. The combination of, amongst a myriad of things, market information, comparative property sales analysis, demand and supply levels, buyer activity and property presentation provide an insight into what fair market price might eventuate for a property, but what does the anticipated or listing price have to do with the final market price?

In short, plenty. Statistics show that sellers that have an inflated opinion of the likely market price of their property lose money in the end. In and around Fremantle, the current seller sentiment measure reveal the “listing versus sold” price indicator is an overall 2.2 per cent. By way of example, a list price of $1,000,000 ends at a sale price of $978,000 using this measure. However, 58 per cent of local vendors are forced to discount their asking prices from their original expectations in order to sell and when they do the variance is a more significant 7.9 per cent. This means that, on average, a seller that needs to discount their original listing price of $1,000,000 ends up at a sale price of $921,000; a $57,000 deficit.

This phenomenon is partly due to buyer perception of “stale” listings; properties that sit on the market for above average periods of time. Such properties are often simply over-priced and buyers often discount them because they think “there must be something wrong with it if no one has bought it.”

Sellers are well advised to take in professional advice from a local REIWA agent and form a considered, unemotional opinion of value based on facts, evidence and reputable market data.

By Hayden Groves
REIWA President
REIA Deputy President

32 Pekho 10x3

Leave a Reply