Auctions! The word alone is enough to send shivers down the spine of most people and is capable of conjuring up all kinds of emotions for both buyers and sellers alike. So it’s not surprising that the majority of people would avoid Auctions like the plague if they had the chance. Unfortunately in a market such as we are experiencing, this is not to be.
In a healthy marketplace, Auction is without a doubt the best way of establishing the highest price available at that time. The advantage of selling by Auction, is that the prospect of price is removed – or at least it should be. Unfortunately, more and more real estate agents these days are using price guides as a way of letting buyers know whether or not they can afford a property. The problem is that these price guides are usually far from accurate and end up causing much frustration for buyers and sellers alike.
There are definite pros and cons for using price guides – here are our top 3.
Price Guides allow buyers to make a decision on whether to inspect a property or not based on whether it’s within their price range. Over time, however, buyers have become ‘conditioned’ to the fact that the majority of agents are low balling the price guides to get them interested. So buyers automatically add at least 10% to whatever the agent is quoting.
What happens when an agent is being honest and quoting a ‘genuine’ price guide? Buyers will still add 10%, may cross the property off their list as being out of their price range, and won’t even bother to show up to the auction. Not a good result for the seller is it?
So in order to ensure buyers turn up to the auction, the price guides will remain low enough to allow for this variation. And buyers will continue to become upset when the property sells way in excess of what’s being quoted. But you must also remember that in the current marketplace, even the agents are surprised by some of the prices being achieved under competitive auction conditions. When properties are selling way above market value and record prices being achieved, the agent has no way of knowing how high each buyer is prepared to stretch themselves.
2. ARE PRICE GUIDES BETTER FOR THE SELLER?
We don’t believe so. Setting a price guide can either encourage or discourage buyers to inspect a property. If the guide is a little too high, then it may be overlooked. However advertising without a price guide allows the buyer to consider whether or not to view the property based solely on it’s attributes and not on its price.
In our view, removing the barrier of price is the best way of attracting the maximum number of buyers to an open home. Everyone knows real estate is a numbers game and this is the quickest way to achieve that. Yes we understand that some of these buyers may not be able to afford the property, however buyers these days are incredibly astute and after just a few months of searching, most have more knowledge on local sales than some real estate agents! The idea is to attract a buyer who falls in love with the property so they will do whatever it takes to secure it. Even if it means borrowing from the in-laws!
3. THE ALTERNATIVE
So what is the answer? If there are no price guides, how will buyers know whether they can afford a property?
The answer is simple…. Recent sales in the area.
Back in the old days (the 90’s) when I first started in real estate, we used to provide buyers with information on sales in the local area to help them ascertain their own estimate of value. Yes, it took up a lot more time than simply quoting a price guide, but it was definitely worth it. The best Auction agents these days will NOT quote a price guide. They will avoid talking vendor’s expectations or even taking offers prior to Auction because they are true believers in the system and know how to maximise the process.
It takes more time and effort to go through the education process this way for each and every buyer but in the end, buyers know that they were not mislead or baited by the agent and that the result achieved was a true reflection of market value. And from the seller’s point of view, this method requires your agent to actually ‘sell’ your property, not just take names, numbers and rely on the property to sell itself!
We’d be interested to hear your thoughts on the subject. Feel free to reply to us here at firstname.lastname@example.org with any insights you might have. We’d love to hear from you!
In the meantime, if you or someone you know is looking to buy or sell a property, be sure to drop us a line for some independent unbiased advice on how to maximise the process. Call Kathryn on 0411 522233 or visit us at www.innovativeproperty.net.au today.