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Friday Mar 30, 2012

'Not all properties overvalued'

Another high profile Cape estate agency CEO, Anton du Plessis of Vineyard Estates, has now commented on the much discussed Erwin Rode statement about the 25% overvaluing of SA residential property.

"If we are talking about the real value that a reputable estate agent would put on a home in, say, the central Southern Suburbs of the Cape Peninsula, it is to me quite clear that Rode's statement cannot be taken seriously.

"However, it has to be accepted that, despite ongoing coverage of this subject in the property media, there still are sellers who have not adjusted to today's market values and who overprice so ludicrously that if and when they finally achieve a sale, it is close to 25% below the asking price."

In today's market, says du Plessis, sellers will usually inflate their prices by ±10% so as to leave room for bargaining and, when they finally sign, will do so at 6 to 7% below the price they had actually anticipated getting.

For example, an Upper Kenilworth seller might ask R5,5 million expecting a price of R5 million and settle for R4,8 million - a 13% drop on the asking price but a 4% drop in reality.

If he was one of the "deluded" as regards his home's true value he would probably have asked for R6 million, only to end up with the same sale price of R4,8 million. He would then have thought that Rode's statement of a 25% overvaluing was correct.

"In fact," says du Plessis, "he was never in the right ballpark on his pricing - so the fact that he had to drop ±25% is irrelevant. The sale price achieved does not reflect a 25% drop in the actual value of the home."

Just how far out sellers can be in their valuations, says du Plessis, was shown recently when a home in Upper Kenilworth was brought to the market at R10 million only to sell after 8 months of exhausting reassessments for R7 million.

"That home was never worth R10 million," said du Plessis, "and the seller had only himself to blame for not accepting the valuation of an experienced agent at the outset. In most cases, a reputable agent should walk away from a property that he considers to be priced far above 10% of his assessment."

Similarly, said du Plessis, a home in Newlands listed at R6 million was sold at R6 million - a 33% drop.

"Again, that seller might be tempted to believe that Rode's blanket valuation was not far wrong - however, once more, the list price was totally unrealistic."

When valuing a home, said du Plessis, an experienced agent will always avoid using a standard formula because every home has to be assessed on its specific merits and flaws. He will take into account what the current owner paid and how long ago he paid it.

"If the home was bought in the last three years, the chances are that the buyer will make no "profit" at all, especially considering the cost of transfer duty at ±7% of the value of the property and that this extra outlay makes absolutely no difference to the actual value of a property. However, any home bought before 2008 will almost certainly have risen in value

"In the end, when advising the client on price, the good agent has only one sure yardstick - the prices obtained recently on similar houses in roughly the same area. Even then, the right price might well be turned down by the buyer because one or two more other homes on the market are threatened with liquidation and are forced to sell well below market values."

Vineyard Estates Press Release

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