Published on March 29, 2023
Following the publication of the latest Statec figures, which have been taken up by many press bodies, many people are asking themselves questions.
How is it that after months of very difficult sales and a consensus among professionals that the sale prices of so-called "existing" objects are mostly falling, the statistics for the last quarter of 2022 show a further increase in prices?
Although this is "only" 5.6%, it is not in line with experience in the field, which clearly indicates falling prices.
Homexperts.lu tries to interpret these rising price statistics which contradict the experience on the field.
Let's start with a brief historical review.
The whole of 2021 was marked by a sharp rise in prices, which was also felt as such by the professionals.
January and February 2022 were still very dynamic months, with a large number of transactions and a perceived continuation of the price increase.
But from the start of the war, i.e. at the end of February and during the course of March, a shock was felt very clearly by realtors: almost from one week to the next, demand fell sharply and purchasing decisions even more so.
After the shock of the war, the spectre of inflation and rising interest rates has further dampened the risk appetite of buyers, including investors, from July 2022 onwards.
But prices have not yet fallen, at least not significantly, until September.
So it was really from September 2022 onwards that estate agents felt a real problem in selling properties at the price levels known up to that point.
At first rather timidly. But as owners who had already bought (or built) a new home could no longer sell their current property, prices fell further and further.
The financial problems associated with the repayment of two loans (the one on the existing property and the bridging loan on the financing of the new acquisition) led many households to accept lower prices (sometimes up to -15 or -20%) as of Q4/2022.
This is logical and easily understood by 2 explanations.
Firstly, most households owned their old property for several years. So even by selling at -15% or -20% they still realised a nice capital gain compared to their purchase price.
Secondly, given the meteoric rise in interest rates, the financial burden of repaying two loans has become untenable for many "double owners". It became therefore preferable to sell at a lower price, but still well above the purchase price, than to no longer be able to repay the monthly payments without having financial problems in the household.
So how do you reconcile the latest rising price statistics with falling market prices?
On the basis of the historical analysis above, it is quite easy if you take into account another very important factor: the time between the signing of the preliminary sales agreement and the notarised deed.
On average, from the signing of the sale agreement, it takes 6 to 8 weeks to get the bank's agreement. Then it takes another month or so for the notarial deed. So between the agreement to sell, which determines the price via the sale agreement, and the notarial deed, 3 months generally pass.
This means that the deeds used for the statistics of last quarter of 2022 are largely based on the Sales agreements signed in the third quarter.
And we have seen above that in the third quarter of 2022 the number of transactions had already fallen sharply, but not yet the prices.
We can conclude from this that the real decrease in prices, observed on the market from the start of the school year 2022, will only start to appear in the statistics from the first quarter of 2023... which will be published in the summer.
There is a time lag of at least 6 months between the price fall observed by professionals on the market and the publication of the respective statistics.
But why then is there still an official increase of 5.6% in the last quarter?
This is also easily understandable, as the market was still strongly up until February 2022. As the official statistics compare one quarter with the same quarter of the previous year, this price increases up to the beginning of 2022 are still reflected in the sales agreements signed between June and September and completed in the last quarter of 2022, as prices had not yet fallen until the start of the school year.
This analysis is also supported by the fact that the prices recorded in the last quarter of 2022 are already almost 2% lower than the prices recorded in the previous quarter.
Where do we go from here? How Homexperts.lu sees the market evolving.
Without going into all the complexity of the market, we would like to point out two aspects that seem to us to be decisive.
1. The continued increase in the interest rates
The last two increases in the European Central Bank's rates have not yet been passed on to Luxembourg clients. We must therefore expect a further increase in borrowing rates of at least 1%.
However, as the market is already extremely quiet now, one can imagine that it will fall even further.
2. Fewer "compulsory" sales
On the other hand, in the coming months there will be fewer households that will be forced to sell at reduced prices to get rid of two mortgages that are weighing down their finances. Why? Simply because from the start of the school year in 2022, they have taken less risk by buying a new home without having first sold their existing property.
As for investors, they have no interest in selling when the market is low anyway. We therefore believe that there will be fewer sellers who are forced to accept low prices and conclude that further significant falls should no longer be expected on a large scale.
On the basis of the above two analyses, we expect the market to remain very quiet in the coming months, with a very low number of transactions, but without further significant and widespread price decreases.
In short, a market at half-mast, which will wait for the first positive signals (i.e. lower interest rates) before regaining momentum.
However, given the current political decisions that are clearly unfavourable to investment in construction, even though demand is very much in place, we can expect a real explosion in prices in the future. The question is just whether it will be in one, two or three years' time... or even later, which will depend mainly on interest rates, buyer confidence and political decisions.
What about bank margins?
Between March and December 2022, the ECB increased the key rate by 2.5% (we do not take into account the 2 increases, which have not yet been passed on to customers), while variable rates for mortgages generally increased by 3% (variations by bank are obviously possible).
That is to say that on average, for each 0.5% increase by the ECCB, the banks have added a margin of 0.2% (which amounts to 40% added to the increase in the key rate) whereas abroad these additional margins seem to be much lower.
While it is perfectly normal and understandable that banks have to make up for years of negative interest rates, let's just hope that they are kind enough to pass on only one of the last two ECB rate hikes to their customers or at least not add any more margin.
So should you sell (respectively buy) or wait?
To answer this question, which many homeowners and buyers are asking themselves, we would like to share with you the feelings we have at Homexperts.lu.
In our opinion, the answer depends not only on the financial capacity of the individual but also on the personal situation.
If you want to sell your current property in order to buy a new, larger home, it is in your interest to sell, as it is highly likely that the reduction you will have to accept on your current (smaller) property will be proportionately smaller than the gain you will be able to make on the new (larger) acquisition. So in the end, you will probably win. However, if you want to sell and then become a tenant, this is not the right time and it is better to wait.
If you want to sell a variable rate financed investment property to reinvest in a new property, you may also come out ahead, as you will probably be able to find a better deal on the purchase than the reduction you are prepared to accept on your sale. On the other hand, if you don't want to reinvest in property, this is probably not the best time to sell.
Finally, if you have inherited a property, you should consider whether you want to rent it out. If you do, it may require renovations, you may be left in joint ownership with other heirs, you may have to accept the risk of getting a bad tenant... If you don't mind, it's probably better to rent out the property for a while and sell in a few years. But if you don't want to take on these disadvantages and risks and would rather have the cash flow quickly, it's better to sell.
Whatever the situation, if you decide to sell, the key is to be well advised to determine a fair and realistic price, which allows you to move forward and avoid "burning" your property.
Last update: 01/2023
For once, let's start this article with a disclaimer. The following reflections are purely personal. They are based on numerous articles, statistics, exchanges with colleagues and expert debates over the last few months, but they do not claim to be exhaustive or to constitute the ultimate truth and should not be used as a basis for making financial decisions. It is important to point out that no one currently has any visibility on the evolution of the property market, which is very uncertain and dependent on the evolution of interest rates. The purpose of this article is above all to give some explanations for the phenomenon of the "slowdown" in the property market, which began in March 2022 as soon as the war in Ukraine broke out, and which clearly worsened for the first time in June/July and again at the end of October and December, after the successive increases in the ECB's key rate.
The rapid and significant slowdown observed in 2022 is the result of a combination of several causes, of which we discuss below those that seem to have the greatest impact.
The fixed rate rose from +-1.3% at the beginning of 2022 to almost 5% at the end of the year. Variable rates have risen a little less, but still by about 3% in less than a year, and the rise is expected to continue in 2023.
This increase has a huge impact on the purchasing capacity of buyers. But it is only by doing simulations that you realise the true scale. For example, to borrow EUR 800,000 over 25 years at a fixed rate of 1.5% at the beginning of 2022, you would have to pay back EUR 3,200 per month. At the end of the year, with a fixed rate of 4.75%, the monthly payments have risen to almost EUR 4,600. This means an extra EUR 1,400 per month for the same loan.
If we simulate the purchasing capacity for equal monthly payments, the result is almost even more frightening. Let's imagine that you are lucky enough to have a personal contribution of EUR 200,000 and that you can pay back EUR 3,200 per month. At the beginning of 2022, this would allow you to borrow EUR 800,000 and thus buy a property at a price of EUR 950,000, taking into account the reduced registration fees ("bëllegen Akt"). At the end of 2022, the same personal contribution and the same monthly payments of EUR 3,200 would only allow the purchase of a property at EUR 730,000. This is a loss of purchasing power of more than EUR 200,000 in less than a year.
These 2 examples illustrate our belief that the massive rise in interest rates is the main reason for the market slowdown. But not the only one...
The price boom we have seen in recent years has resulted in a very high price level, which was bearable as long as borrowing money was cheap thanks to very low interest rates (we are convinced that historically low interest rates are one of the main causes of the price boom since 2009).
On the other hand, with high interest rates, most buyers can no longer afford what they hope to buy (more on this later).
In summary: high prices + very low rates are fine; but high prices + high rates are not.
Many investors now prefer to wait for "good deals", often even on the advice of their bankers. As a result, investor demand has fallen sharply, which has a significant negative impact on demand. This fall is further exacerbated by recent (and pending) Government measures to demotivate investors.
It can certainly be argued that there are positives to this (less upward pressure on prices), but as is often the case there is also a downside. The market is less dynamic, sellers who have to sell for one reason or another can no longer find buyers as easily and are therefore stuck, not to mention that if more and more people can no longer finance a purchase to live in, they will be forced to rent... but if investors no longer invest, there will be a lack of rental accommodation, so we risk an even more serious housing crisis. But this is another subject, which will eventually be the subject of a separate article.
It has undoubtedly become more difficult to obtain bank loans. So even if a buyer wants to buy, it is not certain that he will be able to obtain financing. There has been a significant increase in the number of bank refusals, which obviously has an impact on sales, because it is not just a matter of finding a buyer, but also of obtaining a loan so that the sale can go ahead.
The reasons may be diverse (e.g. fear that prices will fall significantly in the coming months, the obligation to sell because the owner can no longer pay the repayments or the bridging loan, etc.) but the observation is unanimous among property professionals: there have never been as many new mandates as in the last quarter of 2022.
However, we believe that it is possible that this trend will reverse again in 2023... but unfortunately not for the right reasons. Because if owners who move on to a new "life stage" (e.g. two singles become a couple, a couple has a (new) child,...) can no longer afford to buy a new property, they will not be able to sell theirs either. There is therefore a risk that supply will decrease because potential sellers will simply have to wait before they can afford to buy something else.
After years of demand far exceeding supply, the situation has drastically changed. Supply now exceeds demand. Not because there is no longer a need, but because buyers can no longer afford to buy.
According to the law of supply and demand, which is as old as trade itself, if there is more supply and less demand, prices must fall so that supply and demand meet again.
It is no longer news that the cost of renovations has exploded... This has a double effect. Firstly, the budget for buying a property to renovate is decreasing because a higher budget is needed for the work. Secondly, it is almost impossible to get quotes that are valid for more than a few weeks. This frightens and hinders buyers but also banks, which have become very reluctant to finance major works for which they have no visibility.
Heating, electricity, but also petrol, shopping at the supermarket, restaurants... everything has increased and reduces purchasing power in general. So besides the property loan becoming more expensive, the repayment capacity of buyers is further reduced by the general increase in the cost of living, which further reduces the borrowing capacity.
The fundamental problem of the housing market remains unchanged: the demand for housing still exceeds the supply, i.e. there is a shortage of housing to meet the demand. The current rental boom is the best evidence of this. We are therefore not in a situation where the market is fundamentally "at risk" from a surplus of housing. We therefore do not believe that we can, at this stage, speak of a "housing bubble", but this does not mean that prices will not continue to fall in the short (and medium?) term, because of the reasons mentioned above.
Life goes on! Even though moving may be delayed in some situations as mentioned above, other personal or family changes will still result in property transactions. For example, a growing family may be able to manage for a while, but will still need an extra bedroom at some point. They may not be able to buy their dream house, but they will have to move.
The latest figures show that building permits will be down by more than a third in 2023 compared to 2022. This is a ticking time bomb in a market that is already short of housing. As soon as interest rates fall, there is a risk of a new surge in prices, as we also saw after the financial crisis of 2008. In our opinion, investing in property is still a good choice, whether it is for your own home or as an investment.
The need to move and the willingness to buy clearly remain. Unless we enter a prolonged recession with devastating economic effects, demand for housing will continue to exceed supply for a long time to come. But the causes mentioned in the first part of the article make the market very difficult at the moment.
My personal opinion is that there are two possible outcomes to this stalemate.
Firstly, a significant drop in interest rates. This would be the "dream" alternative because not only would it allow buyers to take out loans again, but it would also mean that inflation would be brought under control and therefore construction and renovation costs would stabilise.
But as is often the case, one should not expect too much from dreams.
The second and more likely outcome in the short term would in our opinion be an interaction of 3 phenomena which together could help to "revive" the market:
1. A rebalancing of prices: we can already see that real sales prices are falling and this trend is likely to continue. The more prices fall, the more accessible credit will become again. One may also ask whether a "readjustment" of 10, 15 or even 20% would really be serious? Psychologically, of course, yes, but this would bring us back to approximately the price level of 2020, which does not seem dramatic... at least for owners who bought before 2018 and who are still making a nice capital gain.
2. Visibility on the evolution of variable rates: at present, many buyers can no longer afford to take a fixed rate but are afraid to commit to a variable rate because they don't know how high it will go. As soon as we have better predictability on rates, buyers will be able to start with a variable rate and then possibly switch to a fixed rate.
3. A readjustment of "dream expectations": the new reality (prices that are still high + high interest rates) means that buyers will have to resign themselves to lowering their expectations. In our opinion, this is unavoidable. In order to move forward, buyers will at some point have to accept having one room or a few acres less, a slightly less modern house etc. But this change of mindset cannot be achieved in 3 months. Humans need a little time to accept a new reality that does not correspond to what they had imagined. But in the long run they will get used to it.
No one can give an exact and universal answer to this question.
On the one hand there are too many unknowns (to what extent the situation will become even more difficult before it gets better and how long it will take?) and on the other hand subjective personal assessments (e.g. a growing family needs more space; heirs may not want to remain in joint ownership or invest in an inherited property to be able to rent it out; if the property was the main residence it should be sold to avoid being taxed on the capital gain...)
My opinion, again very personal, is that if one can give oneself a 3 to 5 year horizon, it may be better to wait and launch the sale as soon as the market has recovered and recouped its losses. In the meantime, you continue to live in the building even if it is not 100% ideal or, if it is an investment property, you rent it out again.
But if you are forced to sell fairly quickly (e.g. divorce, inheritance where the heirs do not want to remain in joint ownership, renovation costs that would become too expensive, need for money, inability to cover repayments...) or you do not want to risk the potential disadvantages of renting out, then it is better to start selling quickly as you have no view on how the situation will deteriorate before it improves.
But if you do decide to sell, you should do so at a realistic price that is adapted to the new market conditions and you should expect a longer sales cycle than in recent years.
I hope that these personal reflections help you to make progress with your own. And if you want to talk about it in person, don't hesitate to contact us on 585 506. We will try to understand your situation as well as possible and to advise you objectively, even if this means that you will still have to wait with the sale.
First of all, if it is your main residence, there is no capital gains tax.
For all other cases (e.g. sale of an inherited property, a second home, a rental property, etc.), the explanations below should answer all your questions.
Which tax rate applies?
The gain on sale (i.e. the capital gain you realize on the sale of the property) is taxed at the half overall rate, i.e. half of your annual tax rate.
However, if you sell a property within 2 years of its acquisition, it is no longer a sale profit but a speculation profit, which is taxed at the overall rate.
Therefore, what date should be taken into account as the acquisition date to determine whether it is a disposal profit (the disposal takes place more than 2 years after the acquisition) or a speculative profit (disposals within 2 years of the acquisition)? The date to be taken into account is the date of the notarial deed by which you acquired the property. In the case of free acquisition (i.e. donation or inheritance), the acquisition date is the date on which the property was acquired for valuable consideration by the previous holder.
How is the profit (from sale or speculation) calculated?
The profit is equal to the difference between the selling price (as stipulated in the deed of sale) and the acquisition price and the procurement costs.
The acquisition price is made up of all the expenses incurred by the owner to put the building in its condition at the time of sale. This is therefore the price paid for the property, increased by costs such as transfer duties, VAT, notary fees relating to the deed of sale, etc.
Procurement costs are the costs incurred in direct connection with the sale of the property. This mainly concerns the agency commission and the costs for the energy performance certificate.
It should also be noted that, except in case of speculation profit, the acquisition price is revalued. This is done by multiplying the acquisition price with a coefficient that depends on the year of acquisition of the building. These coefficients change from year to year, so we cannot give a specific example here. The coefficients can be found here.
The profit thus generated may be reduced by one or two allowances, namely:
First, some additional explanations in relation to these 2 allowances:
The decennial allowance of 50.000 EUR per taxpaying partner is, as its name suggests, based on 10 years, ie every 10 years the counters are reset to 0 and you can again fully benefit from this allowance.
Imagine that you are married and in 2010 you sold a building with a capital gain of 70,000 EUR. Since the allowance is 50.000 EUR per partner imposed collectively, you can benefit from a reduction of 70.000 EUR and thus reduce the gain to 0. You will not be taxed at all.
In addition, you still have 30.000 EUR of allowance which you can use on another real estate capital gain until 2020 (2010 + 10 years). So if you sell another building in 2018 on which you realize a capital gain of 50.000 EUR, you will be able to deduct the remaining 30.000 EUR and you will be taxed on only 20.000 EUR.
Then, from 2020 (ie 2010 when you used the first allowance + 10 years), the counters are reset to 0 and you will again be able to benefit again from an allowance of 50.000 EUR per partner imposed collectively. So, if you sell another building in 2022, you can deduct EUR 50,000 per taxpayer from the realized capital gain.
This decennial allowance is not limited to inheritances but each taxpayer can benefit from it.
The one-off allowance of EUR 75,000 is only valid on the sale of a property acquired by way of inheritance in direct line and used as principal residence by the parents of the transferor!
This allowance is not doubled by taxpaying partner and can only be used once.
If, for example, you inherit a flat in 2015 from your father on which you realize a capital gain of 40.000 EUR and you use the allowance, the remaining 35.000 EUR are lost. If you then inherit in 2018 a house from your mother, on which you realize a capital gain of 80.000 EUR, you will not be able to benefit any more of this abatement, or even of the 35.000 EUR which you have not yet used.
The single allowance of 75,000 is however valid per heir, ie if you are 2 heirs, each of the 2 can benefit from this allowance of 75,000 EUR.
As said before, this allowance can only be used if the property was used as main residence by the parents. So, if you inherit one or more properties that were not used as residence, you cannot use the single allowance but you can of course use the decennial allwance to reduce the taxation on these properties.
Let's take a concrete example to illustrate all this.
The capital gain on the sale of the building is EUR 150,000 per heir (ie capital gain of EUR 300,000 divided by 2 heirs).
Heir A can deduct the single deduction of 75,000 EUR and a decennial allowance of 60,000 EUR (decennial allowance of 50,000 EUR per spouse - 40,000 EUR already used). Hair A will therefore be taxed on a capital gain of 150,000 EUR - 75,000 - 60,000 = 15,000 EUR.
Heir B can deduct the single deduction of 75.000 EUR and a decennial allowance of 50.000 EUR. Heir B will therefore be taxed on a capital gain of 150,000 EUR - 75,000 - 50,000 = 25,000 EUR.
For more details on the tax rate, the revaluation coefficient and concrete calculations, please contact us at 585 506.
1. When should I start selling?
If you start too early, you will reduce the number of interested buyers because most will not want to wait too long before they can take possession of their new home or investment. You may therefore not sell within a reasonable time, which will make other buyers suspicious, because they will imagine that there is a problem with the property. Starting too early can therefore be dangerous.
On the other hand, if you start too late, you may find yourself in an emergency situation where you may be forced to accept a bad offer. It is therefore essential to aim for good timing.
For "normal" objects we always recommend taking into account a period of 6 to 8 months between the beginning of the process and the expected sale. We count 2 weeks to start with the sale of your property, about 3 months to find a buyer, 1 month to obtain the buyer's bank agreement and 2 to 3 weeks to fix the notarial deed. This leaves a reserve of 1 to 3 months for possible contingencies (e. g. if the buyer does not obtain a bank agreement) or simply as a security reserve.
On the other hand, if it is an "abnormal" property (e.g. a very expensive house or one requiring a lot of work or a property of a very particular style or with some major weaknesses such as a flat without parking or elevator...) more time should be allowed.
In any case, we will advise you on a case-by-case basis to get the job done.
2. How to determine the right price?
Determining the right price is as important as it is difficult. Even good agencies, which are familiar with evaluation methods and have the necessary experience because they make many sales each year, can sometimes have quite divergent opinions.
For this reason, we always recommend obtaining 3 different estimates from reliable agencies. Then, compare these estimates and, if necessary, challenge the agencies with the estimates of the other agencies.
It is precisely this whole process that Homexperts performs for you, in order to be able to give you sound advice and to select, together with you, the best selling price, but which is nontheless realistic.
3. How am I taxed?
First of all, if it is your own principal residence, there is no tax.
For all other cases (sale in the event of an inheritance, sale of a property for rent or a second home...), read our article "Taxation of real estate capital gain" dedicated exclusively to this theme.
4. How to coordinate the sale with the purchase of a new property?
There is no miracle answer to this question, because it depends mainly on your state of mind. Some people want to avoid risk at all costs and therefore want to sell first, in order to be sure of the price they will get before committing to the purchase of a new item. Others do not want to sell until they are sure they have a new home.
The best way to go ahead is to call us, so that we can understand your situation and your state of mind and give you informed advice. We can also help you find a new home more easily.
5. Do I need to renovate before putting my property up for sale?
Very often, it's a bad idea. Many owners think they are doing the right thing by investing to increase the potential value of the property, but unfortunately this is often more of a waste than anything else. Why? Simply because the buyer will probably have other tastes and may not appreciate the renovations. Imagine that you are repainting your apartment and the owner will want a different color... Or that you are renovating the kitchen or a bathroom, which will not be to the buyer's liking....
However, if your deck is not waterproof or there is a leak in the house, the work is important to solve the problem and reassure the buyer.
We therefore advise you to do as little work as possible and to limit yourself in all cases to work that affects the objective quality and not the subjective beauty of the property.
6. Do I have to remove all the furniture first?
In general, it is advisable to remove as much furniture as possible before the visits. Interested visitors will be able to project themselves better into the building if they are not influenced by any furniture. If this is not possible (we know that sometimes time constraints do not allow it...) take out at least all the personal belongings (paintings, photos, decoration, clothes...) to leave only what is really too difficult to remove in the time available.
Do you have any further questions?
Feel free to contact us by email (firstname.lastname@example.org) or phone: 26 57 07 07.
1. Start too early
Buyers don't like to wait too long. If you cannot vacate the premises within a reasonable time, you may discourage buyers. Consequence: in a first step you may not find buyers, since they will prefer to turn to properties available more quickly. In a second step, buyers will think there is a problem with your property, since it has already been on the market too long. At the end of the day, you thought you were doing well by starting early, but you made the sale unnecessarily complicated.
2. Start too late
That's right... starting too late is also risky. To be sure to sell on time, you may accept an offer at a price that is too low. So make sure you have the time to find the buyer who will accept your price or ask for a small discount, but avoid finding yourself in an emergency situation that will make you accept a bad offer.
So you have to aim for the right time!
Our advice for the 2 first points: unless it is a very typical or particular property, start the sale process 6 to 8 months before your planned move. For special properties (e.g. very expensive or special properties; requiring a lot of renovations...), refer to the advice of your experienced real estate agent. Homexperts can of course advise you objectively.
3. Determine the wrong price
Too high, and you will stay too long sitting on your property. Too low, and you are not optimizing your assets.
Determining the right price is certainly the most critical element of the sale. Unfortunately, many agencies do not master this task, either because of a lack of competence or simply because of a lack of experience. Because one thing is certain: it is not enough to compare prices on real estate portals. As this is not an exact science, valuation methods, recent experience and the interest of potential buyers in the property in question must be mixed to end up with the right price.
Our advice: Make sure you work with an agency that is familiar with the valuation approach but that also makes enough sales per year to have the necessary field experience and that maintains databases of potential buyers. At Homexperts, all these points are part of the selection criteria for our partner agencies.
4. Get a single estimate
Determining the selling price is not an exact science and depends on experience but also on recent similar sales and many other factors. Even among serious and professional agencies, the same property can sometimes be assessed with differences of 10% or more.
Our advice: Always ask 3 serious agencies for estimates, compare the 3 estimates and if necessary challenge the agencies with the other agencies' estimates. The agencies' explanations will allow you to judge the validity of the estimates and the chances of making the sale at the indicated price. At Homexperts, we ensure this process for you and present you with the results of the 3 estimates as well as our analysis and recommendation.
5. Working with the wrong agency
Finding a good agency is not easy at all. But even a good agency is not necessarily the best one to sell your specific property.
Why? There are several reasons. First, geographical specialization. Most agencies will obviously tell you that they sell throughout the country, but few can do it effectively. Conversely, local agencies often do not have the databases of buyers that will allow you to maximize the sale price. Secondly, the type of usual properties sold. Here too, most agencies will tell you that they can sell any type of property. But more often than not, those who usually sell apartments are not in the best position to sell an expensive home. On the other hand, an agency specialising in luxury goods will not necessarily have the best motivation to sell a small flat. And finally, it is mandatory that your agency has a database of potential buyers for your type of property. Because if the agency only publishes the property on real estate portals to find a buyer, its added value is very limited.
Our advice: Ask the right questions and don't be too gullible. But the exercise is not easy. That is why at Homexperts, we objectively advise you on the 3 partner agencies that we believe are best placed to sell your property in question. Because we have no interest in favouring one or the other of our partner agencies, but only to ensure an efficient and effective sale under the best conditions.
6. Renovating too much
Renovating before selling is often a bad idea. You spend your money on something that may not please the buyer. As a result, you will have wasted money and will be frustrated when the buyer does not appreciate the renovations at their true value. Conversely, some renovations can be useful and beneficial for the sale, especially if they solve problems that may discourage buyers.
Our advice: avoid "cladding" renovations (painting, new flooring...) and limit yourself to really necessary improvement work (e. g. waterproofing problems on a terrace...). Ideally, before starting any work, ask a trusted real estate agent for advice.
When serious estate agencies meet owners with a property to sell, they’re used to hearing this phrase.
Unfortunately, in order to get you to sign up with them, many estate agents have no argument to make other than "promising" an exaggerated sale price.
You should be aware that when an agent signs a contract they can never promise a specific sale price. Even the price the agent decides to write into the agency contract is worthless! Because when it comes down to it, it’s the purchaser – i.e. the market – that is going to dictate the final sale price, and not the agent.
Unfortunately, very often the owner – gullible and acting in good faith – interprets these false promises as being a definite guarantee that the property will get sold for the price the agent has "promised". It simply doesn’t work like this!
Often it’s those very agents who promise the highest prices who are also, sadly, the least competent. This is because determining the real "market price" firstly requires expertise and extensive experience, and secondly some pluck... to get the owner to accept the correct market price.
So you ought to be somewhat sceptical of an agent who "promises" you the highest price. Don’t let yourself be blinded by unsubstantiated promises, but instead trust your instinct as to whether the agent you’re dealing with is reliable and has sound expertise.
First of all, what is a “correct valuation”?
There’s only one answer: it’s the valuation which is closest to the "market value", i.e. the price which buyers are willing to pay for your property (and which the banks are willing to fund).
It’s definitely not the highest price that an agent "promises" you (sic). To be sure, such a price can make you dream – but what’s the point of dreaming if your property won’t get sold?
Why is a correct valuation so important?
As was explained in another article on our blog, it takes on average 15 months to sell a house and 17 months a flat. This is a really long time. However, based on these figures from the Observatoire de l'Habitat this is indeed how it is. One of the main reasons why it takes this (enormous) length of time is that very often the asking price is too high. However, you won’t hoodwink anyone: buyers are no fools... and the banks even less so. So your property won’t sell for more than the market price. This means that your house or flat will only sell after you’ve dropped the price (repeatedly).
To save all this time (and your nerves), it’s worthwhile aiming to determine the correct market price from the outset. And you’ll only do this with a correct valuation.
How do you know when you’ve got a correct valuation?
Unfortunately, it’s not an exact science and there’s no miracle solution (at least not yet). So you’ll have to rely on your agency having the experience, expertise and reliability:
If you bear all this in mind, you’ll very soon realise how serious your agent’s valuation is. If they "reel out" a price verbally or even in writing, but without explaining the methods used, warning lights should start to flash. On the other hand, if your agent is able to explain to you in detail the methods used and gives you a carefully worked out document outlining all their conclusions, you’ll know you’re dealing with a professional. If you’re in any doubt, don’t be afraid to challenge your agent on any point, and usually you’ll see straightaway if they really mean what they say.
We’ve already looked at this in other articles: it’s tempting to put your property on at a high price.
However, to explain the risks, let’s take a scenario that crops up on a regular basis.
Outcome: after more than a year the property will be sold for EUR 700,000.
This is a common reaction, but it’s also a typical pitfall.
So what are the real drawbacks of "giving it a go", i.e. asking a high price only to lower it afterwards?
Please note that we’re not saying that you have to put your property on at a reduced price. Quite the opposite. You should put it on at the right price, i.e. at the price the market is willing to pay (or very slightly above)... and to do that you need a professional valuation determined by using several methods and ideally several agencies.
When owners want to sell their house or flat, one of the first things they do is search on property portals to compare prices.
This seems a logical, understandable way of going about things; however, you need to be aware that as a rule the prices shown are not the prices at which the properties are sold.
According to various independent estimates, properties are in fact sold at prices often 10 to 20% below the advertised price!
So if you work out the value of your property by comparing it with similar ones on the Internet this may give you ideas for a price that’s actually quite unrealistic.
If all you’re going to go by when deciding your selling price is this price comparison, you’re likely to waste a lot of time trying to sell your property. And at the end of the day, in order to sell it, you’ll still have to drop your price to the market price.
Analysis of recent statistics from the Observatoire de l'Habitat shows that on average it takes 15 months to sell a house and up to 17 months for a flat. This is mostly because the initial asking prices are too high – since properties which are correctly priced will normally sell within five to six months.
The question you really should be asking yourself is "What’s to be gained by using a good estate agency"?
Because there’s no point at all in using a second-rate, dishonest intermediary who doesn’t have the right expertise. Even if they lower their commission, you’re still going to lose out.
So let’s suppose that you have found a committed, honest and competent agent with the right networks and budget to do the job properly.
This agent can offer you many real advantages:
So you can see that using a proper agent you can trust will help to save you lots of time – and most importantly money too. The key is finding your agent.
Let’s start by explaining first of all the difference between estate agents and property traders.
Estate agents are sales intermediaries who act on behalf of the vendor and find a third party buyer. For their work, agents receive an agency commission, which is usually 3%.
On the other hand, property traders buy the property for themselves and then sell it subsequently, having often carried out at least some renovation beforehand.
Quite often an estate agency may combine both roles. If this is the case, so that there’s no conflict of interest, it’s essential that the agency plays fair by being absolutely clear about its intentions and role.
But let’s go back to our main question: is selling to a property trader to be recommended?
You need to be aware that it’s the property trader’s job to buy properties below the market price!
This is quite logical – since being good professionals they know very well that they’re not going to be able to sell the property above the market price. So if they want to make any profit out of the transaction, they’ll need to buy it below this price.
So you know from the outset that you’re going to sell your property for less than the market price.
However, this still doesn’t mean that selling to a property trader is necessarily a bad thing. You may also find there are certain advantages:
In the end, you’ll need to look at your own personal situation and weigh up the pros and cons.