In a buyer’s market, which we are currently experiencing in South Africa, there are more homes for sale than there are buyers, giving purchasers more choice and, thus, more power to negotiate lower prices.
But this does not mean sellers don’t still carry some weight – some sellers, anyway, and only to a certain extent.
A number of factors can impact the selling prices of properties in a buyer's market, with geographic trends, for example, meaning that some areas are still experiencing a shortage of stock and high buyer demand.
While this could usually work in a seller’s favour, Seeff Property Group agents warn that buyers will still not overpay for properties in these areas.
Properties in desirable locations are also usually able to sell faster than the rest of the market and achieve slightly higher prices, even in a buyer's market. Buyers are generally willing to pay more for homes in safe and convenient neighbourhoods with good schools and amenities.
When buyers have a choice between properties, they will almost always choose the one that is in the best condition and offers the best value for money. If the property has obvious flaws, they are more likely to look for price discounts.
In addition, buyers will compare the prices of the properties they are interested in with those that have recently sold in the area, so sellers should not underestimate the fact that buyers have access to current information on the internet. Overpriced properties will stay on the market for longer and likely sell for less.
Sellers who are motivated to sell are more likely to be more realistic with their asking prices and may be more willing to negotiate their price so that they can conclude a sale. On the other hand, sellers who need to move are usually more motivated while those who can wait, and may cling to a high asking price.
The overall economic and market conditions have a direct impact on the selling prices of properties in a buyer's market. If the economy is struggling and interest rates are high, buyers may be more cautious about buying which generally leads to lower selling prices.
Gerhard van der Linde, managing director for Seeff Pretoria East says that, in a buyer's market, sellers may need to be prepared to negotiate on price and make concessions. Also, the highest offer is not always the best offer.
“If the offer is clean, the buyer’s finances are in order, and there are no further restrictive conditions, it is likely a more advantageous offer compared to a higher price with many issues attached.
“Sellers who have overpriced may become desperate because it has not sold, and may then be open to lower offers.”
Sellers must therefore consider the benefits of accepting the offer on the table versus waiting for another offer that might not be forthcoming.
“If the benefit of accepting outweighs the risks of hoping for a higher offer, rather go with the offer. There is always the option of asking the property consultant if the buyer would be open to a counter-offer, but there might be risks. If the buyer does not accept, the first offer could then also be off the table.”
Usually, the first offer is the best, says Tiaan Pretorius, manager for Seeff Centurion, adding, though, that sellers should ensure they are able to make an informed decision by getting the agent to provide an update on current market conditions and the recent selling prices in the area.