TOP TIPS: Premium Price
What does it take to get a premium price for your property?
A premium price is data driven. It's about looking at comparable blocks of land and comparable houses to give a baseline figure on the value of a property. Any increase on the baseline is considered a premium price.
"There’s a distinct DNA in getting a premium price in real estate," explains Sam Danckert. "Some interest can be attributed to timing of who is in the market and relative competition, which is external and not controllable, however there are key factors that are certainly within a Vendor's control. The most important factor is Agent selection - getting the best person for the job. It might seem quite obvious, but it's vital that a Vendor takes a deep and considered look at who the right Agent is to sell their particular style of property."
At a broad level, you need to select an Agent who understands the suburb that you live in. Someone who is active in the area. On a more micro level, your Agent needs to be comfortable with the price point that you want to achieve for your property and be proficient at reaching these price points.
The way that a successful campaign works, other than via the appropriate advertising that helps to draw buyers in, is for the promotion of the property to work on a whole other dimension. A well connected Agent can bring in qualified buyers to a scenario because they have formed strong relationships with valued clients who have been actively looking in the marketplace.
Says Sam, "There may be five buyers looking at a property that they find realestate.com. Of those five buyers, three may have been given the heads up about the property by the Agent prior to actually seeing the ad come online. That's a big tick right there because the buyers feel like the Agent is offering a service to them. They want to know that their Agent is actively trying to help them find a property. If those five buyers move forward with offers, the three who have been given the heads up (and have some level of trust with the Agent) are probably going to have a lot more trust in the process and be more willing to spend more freely within that process. Partnering with the right Agent, one who has a strong ecosystem of buyers in the right price point, is the key to achieving a premium price for your property.
Achieving a premium price is a result of creating a genuine competitive tension. Having at least two buyers involved in the listing with an Agent who conducts a really fair process that maximises the outcome, is the ideal scenario. So it helps to understand how your Agent will handle the offer process when you get more than one buyer.
Danckert Real Estate is committed to a fair and honourable management of the sales process. We are always extremely upfront with all buyers so that the process is 100% fair. Our goal is to maintain strong relationships with buyers who miss out on the property they love because of a multiple offer situation. In the short term we want to work with under bidders to find them other opportunities and achieving this aim is not possible if you treat buyers unfairly,
Persuading buyers to pay a premium price is achieved by reassuring them that their offer is totally in their control.
Explains Sam, "It’s important to me that I explain to a buyer that they usually only get one chance to make their best offer in a multiple buyer scenario. I want to ensure that they are happy with their offer, and comfortable with the result whichever way it goes. I guide them by helping them test the price they arrive at so if they do miss out on a property by $1000 or $2000 that it sits comfortably with them. It’s really a matter of stress-testing the buyer’s maximum price and posing hypothetical situations. For example, if the bar is set with the Vendor at $1million and the buyer decides to put forward their best offer at $1,051,000, I always ask them if they would be disappointed if I called them when the Vendor has made their decision and tell them that the property has sold for $1,055,000. I ask them if, at that point, they would wish that they had paid more. If the answer is yes, then we still haven’t reached the buyer’s maximum."
"Buyers need to be aware of what their constraints are and no-one should be extending themselves beyond their comfortable capacity, however my responsibility sits firmly with the Vendor to maximise their price. As long as each buyer in that situation is clear that they do need to put forward their best offer in a multiple buyer situation, then no-one can be disappointed at the end if they miss out. They are running their own race effectively and what I can do to help in that situation is reduce the stress for them by condensing the time frame of the process. I ensure that an answer is given within a reasonable time frame, usually within the day of the close of offers. I hear a lot of negative feedback through other processes where buyers are left hanging with no communication for two or three days only to be told they’ve missed out, and that can obviously create a lot of angst and stress."
Creating a sense of urgency and demand by advising of any offers, without disclosing the amount of the offer, and notifying interested parties that they have to make an offer within a time frame, flips the whole power dynamics of the offer process. Ultimately, I am always clear to buyers that I am here to help them find a property at a fair price, but I am paid by the Vendor and that’s who I represent.
Do auctions promote a premium price or what’s the best method of sale?
In Mt Martha there’s a cultural shift at the moment. The area has traditionally been a private sale market and a lot of buyers are conditioned to operate in this system." says Sam. With the broader market dynamics undergoing high demand and low supply of properties, auctions have seen some successful results. There have been some astronomical results here in Mt Martha in the last 18 months. Last year there was a property sale that fetched around $700k above the reserve price. This is something you simply wouldn’t experience in a normal private sale process where buyers submit their best offers. Auctions can create exposed competitive tension that delivers a price tug of war. Is it the best solution for all properties? Probably not at the moment. The effective auction clearance rate in Mt Martha would be sitting at about a 50 – 60% sell rate. The volcano scenario like the one mentioned is a 1 in 20 result. It’s not a reliable way to achieve a premium."
Our other top tips of achieving a premium?
As a Vendor, it's important to get the foundations right.
Look at your competitive landscape. What other properties are available in the marketplace, how does the presentation of these properties compare to yours, what are the features and benefits of these properties, and does your sit above, below or equal to them?
Supply and demand factors will influence what price you can comfortably set your property at and if a premium price tcan be reached. If you get the foundations wrong by quoting too high a price, your Agent may find it more difficult to get a first buyer leave alone a second buyer or third buyer to push the sale price up to a premium level.
For more information on how to achieve a premium price for your property, contact Sam Danckert on 0432 444 040.