Despite of asking price, bidding should be based on the market valuation
In our online community, people frequently discuss how much they should add on top of the listing price. And this article will provide you with insights on the strategies of pricing and bidding.
Various Pricing Strategies
Listing agencies would price similar properties in the same area differently according to various conditions of interior decoration and maintanance. For instance, an unappealing property could be priced high to show the seller’s confidence for its value, while a very nice property could be priced relatively low to attract more potential buyers.
As a result, the asking price could be 275,000 euros (30% higher) or 330,000 euros (9% higher) for an apartment sold at 360,000 euros.
As an example, the following table shows the listing prices and the sold prices of apartments in a compound in the past 6 months. The apartments are all 40 square meters one-bedroom small dwelling size.
As shown in the table, the asking prices are 165,000 euros, 175,000 euros, and 185,000 euros. And all the sold prices are in line with the market valuation and the half year increase on the property value. We can see that high listing prices don’t lead to high sold prices, and that low asking prices don’t mean the property is worthless.
Market valuation is the key
When checking the asking price, we should see whether the asking price is higher or lower than the market valuation of the property, and tell the seller’s tactic and confidence in the property.
Within the price range of rigid demand, most of the agencies use market valuation (the sold prices of similar properties in the past three months) as the asking price, as the sold prices are references for mortgage valuation reports.
Poorly maintained property in need of overhaul, on the contrary, is usually priced higher to make enough room for bargaining. In case the buyer accepted the asking price, the seller would earn good fortune.
Properties listed over 800,000 euros are usually overpriced, and some of the prices could be even 10% more than the market valuation.
In this case, even if the property was sold at the asking price and the appraiser worked hard, it would be difficult to get the sold price lower to match the market valuation.
The following factors should be considered while bidding:
Market valuation, which is the maximum mortgage you could get
Decoration and maintenance
Housing price fluctuation
Therefore, try not to mark up the asking price with the percentages you’ve got from hearsay for the price pretty much depends on the conditions of each individual property. If you did, you would get a property with a lower asking price at a price lower than its market valuation even after markup, or you would get a property with a higher asking price at a price way higher than its market valuation.