In a real estate market where prices are rising rapidly or even in a market that is flat, selecting a real estate agent that promises you a higher than market value selling price or an agent that avoids telling you a likely selling price (due to your property being very unique and hard to value) is unlikely to do you much harm.
It’s unlikely for two very good reasons:
1. In a rising market, the prices will eventually catch up to yours and the buyers will see it as good value.
2. In a flat market, you may not have a buyer available in the market every week for your property and so it may just take longer for the buyer who falls in love with your home to enter the market.
In a market that is moving in a downward trend, the real estate agent who promises you a high selling price can be very dangerous as you are about to find out.
A property was purchased in Randwick in October 2007 for $1,750,000.
After 3 years in October 2010 they decided to put it on the market for sale and move on.
After purchasing this property for $1,750,000 they factored in stamp duty they paid when they originally bought of $81,740, making the total purchase outlay $1,831,740.
Now they are selling they also have to factor in selling costs. They were advised by their real estate agent to spend $10,000 on advertising and marketing and the selling fee would be 2.2% of the selling price or roughly $44,000. So the home seller calculated that the property owed them about $1,885,740.
Instead of focusing on recent comparable properties that had sold, the seller decided to engage a real estate agent that avoided the price telling the seller that their home was very very hard to put a price on due to it’s uniqueness.
This is what many agents are taught to sell property sellers in order to win business without having to discuss the possible selling price. The agents often prefer to find out what the seller is hoping to achieve and then just go along with whatever the seller is hoping for. This proved to be a very expensive mistake as you are about to see.
If the agent had of used comparable sold property prices (other properties with similar attributes; Number of bedrooms, bathrooms and lad size etc..) to get a range from high to low, then the home seller could have made an educated decision about how to market and promote their property to the market. If the had showed this evidence, the home seller would have been informed that the likely selling price would be around $1,800,000 to $1,900,000.
Instead the agent found out the seller was hoping to sell around $2,200,000 to $2,300,000 and proceeded to market the property with no price from September 22nd 2010 to November 13th 2010 using the Auction method of sale.
After a few low offers (and this was a very nice home in a sought after street) for the past 7 weeks and a dismal auction result, the agent suggested the seller put a price on it and try private treaty.
They proceeded to advertise the property for $2,000,000 until the 18th of December when they agent finally convinced the home seller to reduce the price to $1,900,000 but by this time the property was well and truly over exposed to the market (buyers were thinking something must be wrong with the property) and the prices of other comparable properties had dropped due to other sellers who decided to sell comparable properties for between $1,700,000 to $1,800,000.
This is how sellers sell for less, chasing the property market down but not getting in front of it to sell.
The seller followed the agents wrong advice again and by the 12th January they finally decided to take it off the market and give the property a rest.
The seller was approached by another agent in April 2011 who convinced the seller to promote the property again for “No Advertised Price”.
The new agent (both these agents are very well known in the area and considered prestigious) advised the home sellers to advertise their property with NO PRICE. Big mistake.
It’s a big mistake because advertising with no price reduces interest and enquiry by up to 25% and it also gives the agent CONTROL of your price.
Educated and experienced buyers don’t trust many real estate agents who advertise properties with no “Published Price” because they are well aware that many real estate agents tell buyers low property selling price expectations to “Get more buyers in“.
In fact many buyers who have been looking at properties with “No Advertised Price” for at least 2 to 3 months will often say, “What ever price the agent tells you add 5 to 15% and this will give you a figure closer to what the agent promised the home seller to win their business in the first place.
Unfortunately in many cases the buyer is right and both the sellers and the buyers are all being deceived by the real estate agent who is mainly working for themselves to try and carve out a commission for themselves. Too many agents have no regard for the emotions of the buyers who are mislead into false expectations and sellers who are promised high prices when in fact they have no chance.
Back to this property sellers nightmare…
By June 2011 the agent was having no luck finding a buyer and advised the seller to try another auction to get the buyers to take action and give them a deadline to buy.
The deadline is really for the agent to put on the seller to get the seller into a high pressure situation and hopefully convince the seller into accepting what ever the highest price is offered on the day.
Have you ever heard of a buyer that liked a home and didn’t want to try and buy it, hoping that another buyer comes along to bid against them? We haven’t.
On the 22nd of June 2011 the property went to Auction and you guessed it, the highest offer was below the $1,900,000. The seller was lead to believe by this second agent that $1,900,000 was achievable.
Two days after the Auction, the sellers finally having had enough dealing with real estate agents accepted an offer of $1,550,000 to move on with their life.
Yes you read correctly, the seller sold for $250,000 less than they paid 4 years prior in 2007. Plus they had to pay the real estate agents $34,400 and two lots of advertising money totaling over $16,000.
All up the seller lost a fortune, much of it due to real estate agents that avoided telling the sellers the real likely selling price at the start.
Had these sellers been advised right from the start back in September 2010 that the likely selling price is $1,800,000 to $1,900,000 and had they taken this advice and advertised their property with the agent for a selling range of $1,800,000 to $1,900,000 and saved themselves seven months (it would have likely sold well within 2 months at a reasonable price) of dealing with unskilled real estate agents. Plus they would have sold for $250,000 to $300,000 or more than they eventually did.
Don’t make the same mistakes this home seller made. Ask the agents for honest feedback on price and get them to prove their price quote to you like a lawyer would provide proof to convince a jury about a case.
This is far too serious an issue to think “it won’t happen to me“.
This is your financial future.
How long would it take you to save $100,000 or $300,000 after tax and other living expenses?
Selling your home is a serious matter, not all agents are the same and making the decision on who to sell with based on who’s got the most signs or ads in the paper or who is a “Nice” person is a huge MISTAKE.
For a truly different approach to selling your property call Ozway Realty on 1300 307 239 and see what our clients are saying about us on the video references at www.ozwayrealty.com.au/what-others-say/