How Much Is My Property Worth?
“HOW MUCH IS MY PROPERTY WORTH?”
This question pops up in every conversation I have with sellers. That’s normal.
Have you heard of the term, fair market value?
That’s the price a genuine & sincere buyer (not low-ballers) would realistically pay for a property in today’s market.
Determining a property’s fair market value is crucial, but it isn’t always easy, even for seasoned property agents.
Most property sellers only sell once or twice in their lifetime. If seasoned property agents aren’t always able to determine the property’s fair market value, then what are the odds of the typical property seller?
What happens if there is a mismatch between what the seller thinks the property is worth versus the property’s actual fair market value?
Low chance of sale.
How do I assess the fair market value of a property?
Let’s take a look at this case study below.
A SELLER’S DILEMMA
I’ve seen my fair share of flawed pricing judgments over the years.
Such situations inevitably lead to frustrations and questions. These are the most common questions I’ve received:
- Why is there no one coming to view my property?
- Why is there no offer for the property?
- Is my property agent working?
- What is happening!?
Before they contacted me, these sellers were already selling their properties through other property agents. I decided to pen this post after I received another such call recently.
The seller, Justine (not her real name), had been trying to sell her one-bedroom condo for the last four months. She was perplexed as to why she had not received a single offer.
Her condo was fairly new and had an extensive renovation, costing her over $100k.
After the three-month exclusive agreement with the first property agent expired, she engaged a different agent. She got very worried when the second agent didn’t conduct a single viewing after one month.
My unit is very nice. Both agents also agreed. I’m not looking to make a profit at all.
I only want to take back my renovation cost.
Do you think my 2nd property agent is really working?
How can it be that there’s no single viewing?
Justine
Me: “Did both agents provide you with a market update? Did they discuss the price with you?”
Justine: “No. They know what price I want.”
My first thought?
Wrong pricing.
I promised her I would look into it and get back to her.
UNCOVERING THE TRUTH
A. ADVERTISEMENTS
Her current property agent’s advertisements looked fine. Photos were nicely taken with proper listing descriptions.
B. SALES TRANSACTIONS
This condo had a mix of one to four-bedroom units.
In 2018, 2 one-bedroom units were sold for $740k and $755k, respectively, an average of one sale every six months.
In 2019, only 1 one-bedroom unit was sold—at $720k. This means the rate of sale has gotten worse, with only 1 unit sold for the whole year.
This condo has 250 one-bedroom units. If only 1 or 2 units get transacted per year, what does it tell you about the demand for one-bedroom units in this condo?
Wait a minute… perhaps there were very few sellers?
C. SALE SUPPLY
A check on Singapore’s most popular property portal showed there were 29 one-bedroom units listed for sale.
Assuming half of these were duplicates, there were still close to 15 units that were trying to find buyers. The actual count might be higher if listings from other property portals were factored in.
So, the lack of resale activity in this condo wasn’t due to a lack of supply.
It was either due to a lack of demand or mispricing.
D. BANK VALUATION
Justine “only wanted” $838k right now. She had wanted higher originally.
The last transacted price for a one-bedroom unit here was $725k. As a result, most banks were only prepared to support a valuation around this figure.
Although Justine had spent more than $100k renovating her one-bedroom unit, it was extremely unlikely that the banks would grant a valuation that would match the price that she wanted.
This is simply how valuation works. The current valuation is usually pegged to the last done price.
If the valuation was $750k and a buyer purchased the unit for $838k, the buyer’s loan would be computed based on $750k. The $88k difference (also known as COV, cash over valuation) would have to be paid in cash by the buyer.
Unless we are talking about an exceptionally rare property, how many buyers would be happy and willing to pay a COV more than 10% above the valuation?
Not forgetting the buyers had at least another 14 units to choose from.
Would you as a buyer?
Think about it.
E. COMPETITION IN THE CONDO
How much were the other units asking for?
The cheapest was asking for $738k. Prices went up gradually from there.
As this was a fairly new condo, most of the units listed for sale looked fairly similar on the inside.
Would you prefer to pay COV for what a seller had designed (& stayed in) or would you prefer to pay a lower price and renovate the unit to your exact taste?
F. COMPETITION IN THE DISTRICT
There were 225 one-bedroom units (all completed) listed for sale in the district.
The number of one-bedroom transactions in that district for the whole of 2019?
9.
What does this tell you?
THE UNPLEASANT TRUTH
My analysis revealed:
- lack of demand for one-bedroom units in Justine’s condo
- the unit was overpriced and faced a valuation challenge
- strong competition at the district level
Unfortunately, Justine’s unit would likely remain unsold for quite some time until something changes. I haven’t even touched on the overall state of the property market.
She was shocked. Both of her property agents didn’t share any of the above with her.
They simply took her instructions and proceeded without any form of validation.
Will the unit fetch $838k one day? Yes, maybe. But not right now.
What I’ve shared above may not always be the best approach for each and every property. We have to consider the uniqueness and characteristics of the property in question before deciding on the approach to take. For example, landed properties are assessed differently.
What about you?
How do you determine the fair market value for your property?
If you are unsure about your property’s fair market value, I’m here to help you.
P.S. While this case study happened some time ago, the methodology I used remains relevant and unchanged.
WHAT BRINGS YOU HERE TODAY?
Are you wondering what to do in today’s market?
Perhaps you already have a clear mind of what you want to do?
In my blog, I often share stories of the challenges, triumphs, and lessons learned in my work as a real estate agent in Singapore.
Regardless of your situation, you can use me as a sounding board. I’ll provide perspective and clarity from my experience to help you make the most appropriate real estate decision in 2025.
