“To lower the price, There is always time”. This is one of the most common phrases with which a real estate mediator closes with his client the price of the house that he is going to commercialize. But to the owner of that property, Do you favor going out to the market with a first inflated price?; that difference, Will it provide a good margin to negotiate or scare off potential buyers?
The Spanish market for home sales of second hand reflects a price premium from 10% and the 25% regarding the final sale price, depending on the source to be consulted. The process is simple: the appraisal of the home is 200.000 euros, the real estate agent captures the owner with a tempting proposal to 220.000 euros, but finally the owner decides that the starting price is 240.000: “It's what my neighbor asked for the first one a year ago”, justifies.
“It is a sector that values capturing the property, not if you get it at a fair price”, Explain Gonzalo Bernardos, professor at University of Barcelona and well-known real estate analyst: “Later there will be time to explain that at that price there is no interested, so the price will have to be lowered. And in my opinion this contributes to the loss of prestige of the profession”.
For Jesus Duke, vice president of Alfa Real Estate, is about "a practice based on the Spanish mentality. The buyer wants to pay less than it is worth, and the owner wants to charge more than it's worth, but in the end the price is set by the market”.
Toni Expósito, CEO of Buy house, introduces another conjunctural variant in the analysis: “It varies greatly as supply or demand grows. Towards the middle of 2019 our assessment was that near the 85% of the floors were overrated in a 20%. However today, and since Christmas we notice a cooling of demand and a longer period of reflection, prices begin to hold back and reflect figures closer to reality”.
Shared point of view from the appraiser Forget it by Cesar Escobar, co-director of Valuation Control: “The Spanish real estate market is based on a market economy whose basic principle is the law of supply and demand. It is a heterogeneous market and its evolution depends fundamentally on economic conditions., social, administrative and urban planning of the different geographical areas, in which negotiation should be considered as one more ingredient of the system itself”.
Does inflating the price favor the seller?
Point where there is a greater coincidence between the experts: brings more disadvantages than advantages.
“Overvalue a home on 15% or the 20% in a bull market it may be possible”, continues the teacher Bernardos, “it will take longer to sell, but the rise in prices will catch you in a few months, how it happened 2004 a 2006. But overvalue a 15% in the current situation it is very dangerous, because you are going to waste important time. What the buyer does not know because nobody tells them, is that at this juncture the margin to negotiate has increased brutally, so you should bid”.
Duque also identifies disadvantages. “By inflating prices many prospective buyers are excluded for thinking that it is inaccessible to them. And by not selling the house, there is no other choice but to go down gradually until putting it at real market price”. For this reason, Alfa Inmobiliaria warns of the risk of burning the house: “When it is first published on portals, in those first days is when the highest number of views occurs. If we are very expensive, all these people who see it will discard it and all that remains is to wait for the drip that arrives as the drops occur. And in that process many people may lose interest in it”.
A practice that clouds the market?
For some agents this practice reduces transparency. “For this reason, the difference between the prices of portals and those offered by agencies such as appraisers is increasing., colleges of notaries or registrars”. But Expósito also believes that this fact “comes in handy for real estate professionals, since our advice to the owners who trust us is accompanied by real sales witnesses of our operations, real closing prices of the Property Registry and notaries. It is the difference between putting a property up for sale or making a strategy to sell it”.
From Tinsa, Escobar defends that there are more and more sources of information "so it is undeniable that there is more public information that is easy to contrast by all the agents that intervene. For this reason, the existence of offers with supposedly inflated exit prices may cause the future buyer to discard them initially or start a strong negotiation due to having enough information. And the seller will be forced to adjust the price accordingly”.
Should this practice disappear from the market?
What there is a coincidence among experts is that real estate haggling It is a practice that, however established it is in Spain, should go awayr.
“Yes, I think it is a practice that we should eradicate, to achieve greater transparency and efficiency in the sector ”, defends Expósito. For Duque “it would be very beneficial for all parties to eliminate this practice. In fact, It is a task that we carry out when a seller arrives at one of our offices, We inform you of the real price at which that home can be sold in an adequate period of time”.
But Bernardos does not see great signs of change: “I do not see it, at least for now. Of course it goes through practices such as making the owner aware that it is not beneficial, but also that the real estate agent captures with greater knowledge of the market and pedagogy, and portals clearly inform about the reduction in prices since they are announced. But what I'm convinced of is that there are fewer and fewer 'blackbirds' because the buyer is more informed. And there will be less this year in which nobody is going to pay a single euro more than they consider fair.”.
Tinsa's experience points to some natural correction: “It allows us to verify that, in general, the closings of operations are closer to the prices of the initial offer.. But obviously there may be exceptions”, point out.