Quick sales result in lower levels of vendor discounting

One of the great challenges for a vendor is whether to accept an initial offer on their property which may not be at the price they want or whether to hold out for a better price.

In this week’s Property Pulse we look at vendor discounting levels based on the typical number of days it takes to sell a home.

Most home owners who are seeking to sell their property have the goal of selling their home quickly and at a price equal to or above market value. The reality is that in many instances, homes don’t sell at the list price and there is a level of negotiation on the price.

Given this fact, many vendors will ponder whether to accept early offers or wait it out for buyers with higher price offerings. If you wait longer will you get a better price or is an initial offer going to be the best one you get? This week’s analysis suggests that the latter is generally the better option.

Based on private treaty sales on a month-to-month basis, RP Data has looked at the average discounting level for homes sold across a number of time frames: less than 30 days, 30 to 59 days, 60 to 89 days, 90 to 119 days and 120 days or more.

As the first chart shows, if a home sells in less than 30 days, it has consistently recorded the lowest level of discounting by vendors. On the other hand, homes that sell after 120 days on the market have consistently recorded the highest level of discounting by vendors.

Over the past five years, homes selling in less than 30 days have recorded an average vendor discount of -3.9% on a monthly basis. In comparison, home selling between 30 and 60 days have recorded an average of -5.2% followed by: 60 to 90 days (-6.5%), 90 to 120 days (-7.6%) and 120 days or more (-10.1%).

The second chart highlights these same figures but specifically at a combined capital city level. As you can see, properties selling in less than 30 days once again typically sell with the lowest level of discounting and those selling after 120 days have the highest discount levels.

The capital city data also highlights the typically superior selling conditions across these markets compared to the broader national housing market.

Whereas at a national level homes selling in less than 30 days had a typical discount of -3.9% over the past five years, it was slightly better at -3.8% across the capital cities.

On the other hand, capital city homes taking longer than 120 days to sell have had an average discount of -9.6% compared to -10.1% across the whole nation.

Across the individual capital city markets the trends are once again fairly consistent with quick sales experiencing low levels of discounting while properties that sit on the market for a longer time typically see excessive levels of discount.

Over the past five years, home sales that have taken less than 30 days to sell have recorded an average vendor discount of as little as -2.0% in Canberra and as much as -4.6% in Brisbane.

Those homes that have taken more than 120 days to sell have been discounted by an average of as much as -10.7% in Brisbane and as little as -7.1% in Canberra.

The other important component of this equation is understanding what proportion of sales occur in less than 30 days. Analysing the results on a month-to-month basis shows that over the past five years, 22.7% of home sales sold in less than 30 days.

In comparison, an average of 28.2% of homes took more than 120 days to sell. What this data suggests is that the majority of vendors are taking more than 30 days to sell their home and are subsequently having to offer larger discounts in order to sell.

Across the combined capital cities we once again see similar trends to those across the nation however, slightly more people have, on average, sold their homes in less than 30 days.

On a monthly basis over the five years to May 2013, 26.0% of capital city sales have occurred in less than 30 days compared to 23.6% of sales taking 120 days or more.

It is important to remember that not every home is going to get an offer within the 30 days of listing, but a property is most likely to receive offers when it is newly listed for sale. These statistics highlight the importance of setting a realistic asking price from the outset.

If the vendors do this they are likely to sell the home quickly with a relatively low level of discount, if not they run the risk of the home sitting on the market for a long time and ultimately having to be discounted significantly.


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