Since I joined Domain Property Advocates, I have been inundated with people encouraging me to write a blog about my experiences as an agent, through the eyes of an advocate. On a regular basis I will be writing blogs about these experiences & other topics of interest which in future you can view at :  www.thepropertyadvocate.com.au 

Rob’s Blog: Is the price right?

There has been much conjecture about underquoting, particularly at the moment when prices are rising so quickly.  Here is a great case study.

A property we inspected was worth far more than what the agent was letting on.  In the Agent’s defence, the Vendor had purchased elsewhere and the house had to be sold….Based on what the agent was quoting, this would have been a great buy but we were told to forget putting in an offer because the vendor wanted to go to auction.  The presumption here is if the house was sold within the 10% price range quoted by the agent then, the vendors reserve would be within that range too. 

True so far, but how does that assist the buyer when the property is going to sell for significantly more than the agent is quoting?  Here are some tips:

1. Request the comparable sales data the agent relied upon to determine their opinion of value.  Whilst the agent may refuse your request based on client confidentiality, it has far greater meaning than the irrelevant sales data agents often hand out at inspections.  Confusing? Absolutely!  That is why they are summarised as relevant, not comparable.

2. Contact the agent’s competition and seek their opinion of what the property is worth.  Most vendors call in at least two agents so it is logical other agents have  presented their sales proposals to the Vendor.  What’s in it for the losing agent to discuss values with you?  Goodwill, particularly if you have a house to sell….the prospect of an appraisal is a great trade off, and the information you get could be crucial.

3. Ask the question, what does the agent really think the property will sell for?  Don’t ask them in the first week as they will not have had the opportunity to do any buyer follow up. But at the end of the second or third weeks of the advertising campaign (a campaign usually runs for about 4 weeks) a good agent will know or have a really good idea what the property is going to sell for based on qualifying questions he asks buyers including any offers they received.

Just as an aside, did you know that if you submit an offer in writing to the agent, even if they advise you that the property is going to auction, they must reflect that offer in the price they are quoting, and submit your offer to the vendor.  What frustrates most buyers is the flat line response to the question:  Is there a price the vendor would sell for prior to auction?  You would think that if the vendor was fully informed from the beginning there is a possibility that a sale could be concluded….this in itself is another story which I will cover in next month’s blog.

4. Establishing how much prices exceed the vendors reserve price at auction can provide an important indicator of the final price, the form guide I call it.  Most agents discuss internally how much certain properties sell above the reserve to gauge how much the market is rising. For example, if a house sold for $1 million on a reserve of say $800,000, and the price being quoted was $730,000 plus, then it is possible to predict potential blow outs of other like properties. Given that the median price has risen 15 % in the last quarter, this information can be vital in establishing the finishing price – if you buy it for less then that is a bonus. Be prepared !

On numerous occasions I have overheard buyers comment what a great price the agent achieved when in actual fact it was the result of a rising market and a vendors reserve based on historic data and opinions that are relevant but out of date. Is this the agent’s fault ? No, as comparable sales data can often be several months old and guessing would be akin to negligence.

GLOSSARY OF TERMS :

What is a qualifying question to a buyer ? What do you think the property will sell for

What is a relevant sale ? A property sale that is not similar e.g An agent could include a sale in the same street that is significantly more expensive so that the buyer gets some perspective on values

What is a comparable sale ? A property sale that is almost identical

ROB’S  BLOG ….to be continued        

In a volatile market place, should a vendor pay the agent a higher commission if the property exceeds a certain price? and  if so, in a falling market, would the opposite apply?

Why the Code of Silence ? and how does that relate to caveat emptor ?

How can I really find out what my property is really worth ?

Find out what has happened in the property market over the last week and also current and archived articles with tips, market updates and advice.

Rob Millar 0414 330 179