Dovi Lichtenstein, experts residential auctioneer.
Home sellers be warned. Months of anguish await if they allow their hearts to rule their heads when establishing the asking price for their properties.
The consumer alert has been sounded by Dovi Lichtenstein, one of South Africa’s most influential auctioneers and property specialists.
The market ultimately administers a reality-check, but until then the seller lives in false hope.
Lichtenstein says sellers are misled by their emotional connection to their homes. Misleading prices may then be entrenched by property advisors who may accept unreasonable pricing as a strategy of acquiring the right to the sale.
“This is the traditional top-down approach to home sales,” termed by Lichtenstein.“You start high and may come down several times over two to four months. Each price reduction adds to emotional trauma. The prospect of further reductions can then complicate a sale as potential buyers hold off, waiting for a bargain basement price.”
He estimates that 95% of asking prices in this scenario are somewhat inflated. The alternative, he says is what he calls the, bottom-up model.
“With Lichtenstein’s approach,” he says, “the reality-check comes upfront when prospective sellers and himself conduct an objective sound assessment, covering sales trends, location, features and finishes and other factors influencing sale-ability.
“This generates a base price or what is referred to as a reserve price in the auction genre which Lichtenstein is well versed in. Experience indicates that due to the hype an auction creates and its proven ability to generate multiple offers on the day, using the auction method is becoming the way to sell”. He adds: “We can already see a significant increase in the amount of properties being sold on auction in the United States. I expect this trend to grow globally during this year”.
Lichtenstein notes: “In cases where prospective sellers consider an auction, but opt for traditional methods, a key factor is often the belief that the auction method is only for distressed sales”.
“This leads to the erroneous impression that traditional sales will generate higher prices. Generally, the opposite is true.”
Market education is necessary to correct these impressions.
“A market-related price or hammer price is the equivalent of the book price,” explains Lichtenstein.
“Consumers accept that book prices apply in the car market, but not in the property market. In fact, de facto book prices apply in all markets”.
“Lichtenstein’s method alerts consumers to these realities. Unfortunately, the top-down alternative relies on emotions instead. As a result, consumer emotions are put through the ringer until reason prevails.”