How to have the price conversation early to manage the expectations of vendors and support them in signing up to realistic prices.
The first time I sold a house, my husband briefed me on what to expect.
“The agent will tell us our place is worth heaps of money and then every week, they will ring us and say the market is coming off the boil and it is worth less and less until we feel grateful just to sell it at all,” he said.
“Really?” I was shocked. “Why don’t we just get a good agent who will tell us the real value of the place?”
We listed with a professional agent who waxed lyrical about our lovely home (it was a two bedroom miners cottage with rising damp) and talked about the record prices that were being achieved in the area. No sooner had the ink dried on our listing contract than, miraculously, the market came “off”, and the calls to temper our excitement began.
It was 1999 and there was no such thing as big data. Our little inner city cottage – which strained at the seams with two babies – successfully sold at auction but for considerably less than the original figure we’d been told to expect. As we’d bought in the early 80s, we did well, getting a price that we felt justified years of double digit interest rates.
But the idea that “managing down” price expectations was a standard real estate practice always rankled. What kind of an industry put all its energy into trying to minimise the disappointment – and ill will - of a customer because of an unrealistic early promise?
In 2014, the best practice for agents is to develop relationships with vendors based on trust and honesty by doing what Tom Panos calls “getting ugly early” about price.
Happily there are now a host of tools make it easier for agents to manage the expectations of vendors and support them in signing up to realistic prices. Here’s three:
- Encourage vendors to do their own research
There are a host of free tools that buyers and sellers can now use to do their own research into the property market and this should be encouraged by agents.
Encourage your vendors to download property apps, use the free reports on Realestate.com.au or access reports on propertyvalue.com.au to get their own feel for values.
- Offer an AVM
Nothing states “this is how much you’ll get for your home” like an estimate that the bank would use. After all, if the bank won’t lend on the amount a vendor wants, it is going to significantly decrease the number of potential buyers.
AVMs can easily be created by agents with the valuation upgrade in RP Data Professional.
An AVM is no guarantee of the final price that will be achieved by a sale, but it can be a wake-up call if vendor expectations are way above the market and can be used to justify why an offer is realistic or to help vendors understand where an auction reserve should be set.
- Keep vendors abreast of ongoing sales
Many agents provide vendors recent sales at the listing presentation but once the client is signed up, they receive only email spam about everything the agent has on offer.
Identifying properties every week similar to the vendors that are both coming onto the market and selling (easily done through the CoreLogic iPad app) and providing these as a simple report gives agents a talking point upon which to base conversations with vendors based on data, rather than opinion and delivers a superior service.
- Let the vendor set the price
There are several ways you can empower your vendor to determine their own price expectations. Invite vendors to attend open houses and auctions of properties similar to theirs so they can check out the competition. This is simple but effective - most vendors only think about attending open houses for properties they’d like to buy and assume their own home is unique. Realising otherwise can be valuable and sobering.
You can lock in this knowledge using RP Lister on iPad, which allows vendors to see on-the-market properties and decide if the features of their home are better or worse. The program then delivers an end price based on their choices.
Kylie Davis is the Head of Marketing – Property Solutions at CoreLogic.