Understanding price discounting when you’re selling a property

Pricing is probably the most difficult part of the selling process for vendors to come to grips with.  sale sign auction house property market

A vendor’s biggest challenge is usually understanding, and getting comfortable with, the fair market value of their home.

It’s a truism in real estate that no matter the state of the market a property will only sell for the price a purchaser is willing to pay.

This is different from most retail goods – for instance, groceries – that are only available for the stated price.

For a sale to be achieved the vendor must decide to accept what the market is willing to pay, and that number is an outcome of competition between buyers and other homes on the market.

Fair market value can change pretty quickly and we’ve seen evidence of this over the past few months in some segments of the market which are softening after a strong four-year run.

Private Sale vs Auction 

Generally, properties sold via private treaty don’t sell at the initial asking price – it’s usually slightly lower.

It’s often a different story with auctions because it’s the competition and interest on the day that dictates the final selling price.

With private treaty sales, you advertise the desired price or range from the start and buyers negotiate from there.

In changing markets, vendors often struggle to accept that what their property might have sold for six months ago isn’t what it’s likely to sell for today.

During the GFC, discounting blew out to seven per cent for this exact reason.

So, let’s take a look at current discounting on a national scale

Clearly this information from CoreLogic shows, that on a national level, the days on market it takes to sell a property is falling and the amount vendors need to discount their properties is also falling.

home price discounting

What this graph doesn’t show is how different this is from state to state and even suburb to suburb within individual states.

For example in the hot suburbs of Melbourne and Sydney proeprties sell quickly and in many parts of Perth and Darwin, properties take a long time to sell as there are more properties for sale than there are buyers.

The price is right

Correctly priced properties will generate strong buyer competition, while overpriced properties, in most cases, simply won’t sell.

Your agent plays an important role in all of this and should tell you what you need to hear on pricing – not necessarily what you want to hear.

They’ll show you recent comparable sales and explain in detail how the market has changed and why your initial expectations may be unrealistic.price property

A good agent will recommend pricing a property at fair market value, they’ll then work with the seller to improve the home’s presentation (and thus its appeal to buyers) and implement a strategic marketing campaign to maximise competition and thereby its sale price.

A very common mistake that vendors make is putting an inflated price – their “dream” price – on their property in the hope that someone might pay it.

They believe they’re doing the sale and themselves a service by creating the opportunity to get an outstanding price.

If no one makes an offer at this hopeful price, they reason that they can always bring the price down.

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.

For every one example of a private treaty vendor selling for a phenomenal price, I hear a dozen stories of people who reject solid offers only to accept a lesser amount later when they property has languished on the market unsold.


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Rita Thomas


is a Property Strategist with an accounting background and over 30 years’ Commercial Banking experience. She is a passionate property investor who enjoys helping her clients create wealth through property investment using Metropole’s strategic approach.
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