Comparative market analysis in real estate | How to sell when interest rates are high

Selling a property in a competitive market can be a daunting task and, in order to realise the best possible price in the shortest possible time, it’s imperative that the seller understands the property’s true market value, and this is where Comparative Market Analysis (CMA) can be a powerful tool.

So says Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, adding that a CMA can guide sellers towards pricing their homes correctly from the start and also help them to make informed decisions about a number of important factors.

“Whether you’re a first-time seller or a seasoned homeowner, understanding the significance of a CMA can make all the difference.

“And by leveraging the expertise of a skilled real estate professional and understanding the nuances of the CMA process, you position yourself to sell your property at the right price and with confidence.”

Geffen explains: “In a nutshell, a CMA is a comprehensive evaluation of a property’s value based on recent sales of similar properties in the same area and, by taking into account various factors, it provides sellers with a clear picture of how their property compares to others on the market and assists in setting a realistic listing price.”

Why is CMA Important?

Accurate Pricing: Overpricing a property can discourage potential buyers, while under-pricing can lead to financial losses. A well-prepared CMA helps determine the optimal price, attracting interested buyers and maximizing the property’s value.

Market Insights: A CMA provides valuable insights into the current market conditions, helping sellers understand trends, demand, and competition. This knowledge enables informed decision-making.

Competitive Edge: In a competitive real estate market, a well-priced property stands out. CMA helps position your property effectively, increasing the chances of a quicker sale.

Negotiation Power: Armed with data from a CMA, sellers are better equipped to negotiate with potential buyers, ensuring a fair and mutually beneficial deal.

“Although a CMA is a simple concept, it takes skill and a thorough knowledge of the market to prepare one accurately, says Geffen, “which is why it’s important to ensure you appoint an experienced agent with a strong track record in your area.”

The agent will compile the CMA by:

Gathering Data: A real estate agent collects data on recent sales of comparable properties, active listings, and properties that failed to sell (expired listings) in the target area.

Comparing Similarities and Differences: The agent identifies properties that are similar to yours in terms of size, location, condition, age, features, and amenities.

Making adjustments: To account for differences, the agent makes adjustments to the comps’ prices based on factors like square footage, number of bedrooms, upgrades, and condition.

Calculating Price Range: Using the adjusted comps, the agent calculates a price range for your property, considering various scenarios and market conditions.

Analysing Market Trends: The agent analyses market trends, including inventory levels, average days on market, and the ratio of list price to sale price. These factors contribute to the final price recommendation.

“Although the CMA is a very insightful document, it can’t work miracles and sellers need to be objective and realistic because whilst an emotional attachment to the property is understandable, a CMA focuses on data-driven analysis. Be open to adjusting your price expectations based on market realities.

“Its also important to be aware of the fact that timing matters because market conditions can change rapidly and, if the market is shifting, your CMA might need to be updated to reflect the latest data.”

Geffen says that it’s also important for sellers to understand and be aware of the following:

Adjustments: The adjustments made to comparable property prices might seem arbitrary, but they’re based on market perceptions. Discuss these adjustments with your agent to ensure transparency.

Keep Comparables Local: Comparable properties should be as close to your property’s location as possible. Factors like neighborhood dynamics and school districts significantly impact value.

Active Listings: While active listings are part of the CMA, remember that their actual sale prices might differ. These properties are your competition, and your pricing strategy should consider them carefully.

Expired Listings: Studying expired listings provides insights into what buyers are not willing to pay. This can guide you in avoiding common pitfalls.

Flexibility: Be prepared to adjust your price based on buyer feedback and market response. A well-timed price adjustment can rejuvenate interest in your property.

“In the intricate and dynamic world of real estate, having accurate information is a strategic advantage and comparative Market Analysis offers just that – an informed understanding of your property’s value in relation to the current market,” concludes Geffen.

“This knowledge can guide you towards setting a competitive listing price, attracting the right buyers, and ultimately achieving a successful sale. Partner with a seasoned realtor who can provide a thorough and accurate CMA, ensuring that your selling journey is built on solid foundations of market knowledge and expertise.”

How to sell when interest rates are high 

High interest rates mean consumer affordability is impacted, which will lead to fewer buyers who can afford to purchase property. With a shrinking buyer pool, sellers will need to adopt different marketing strategies to ensure that their property sells.

According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, depending on how high demand is for the area, sellers might need to adjust prices downwards to get their homes sold. “Selling a home when interest rates are high is challenging because the pool of potential buyers is much smaller. This means that the home needs to be competitively priced and well presented to stand out in a crowded market,” he advises.

To help sellers achieve a timeous sale while interest rates remain high, RE/MAX of Southern Africa shares a few tips:

Ask if the buyer is pre-qualified

When interest rates are high, there is increased risk around buyers who require home finance to fund the purchase. Nothing is more upsetting than accepting an offer only to find out that the buyer cannot qualify for the required home finance. To avoid this disappointment and unnecessary delays, tell your real estate professional to only allow viewing appointments for buyers who are already pre-qualified.

Make the home as attractive as possible

Buyers who can afford to purchase when interest rates are high are generally spoilt for choice. This means that sellers will need to make their home as appealing as possible to stand out from other similar homes in the market. Trust the advice of your agent in this regard. Whether they advise that you repaint a room, declutter a space, or even ask you to drop the asking price, following their advice could lead to a much smoother sale.

Work with experienced professionals

High interest rates tends to lead to fewer qualified buyers. This means that your real estate agent is going to have to work a lot harder to find and attract suitable buyers. That’s why it is imperative to work with an agent who has the relevant database of clients, marketing and negotiating skills to make sure your home sells at the right price and within a reasonable timeframe.

Sign a sole mandate

When interest rates are high, more homes tend to hit the market which means that real estate agents start to juggle many sellers at once. To make sure your real estate agent stays focused and motivated on the sale of your home, sign a sole mandate with them. Many sellers have the misconception that the more agents you have marketing your home, the better your chances it will sell. In fact, having a property listed with multiple agents will decrease an agent’s accountability and therefore their motivation to sell the home.

As a final word of advice, Goslett reminds sellers that each market is unique, and will require its own set of selling strategies depending on where the home is located. “Work with a reliable local real estate agent who can tailor your approach based on your specific circumstances and unique market trends,” he says.



Source: Property24


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