If you want above market price for your property, agents have a number of tricks to bring you back into line. Some of these tactics are subtle, others are more transparent. Either way, when you know what they are, you stand some chance of protecting yourself.
Pre-auction low offer – If you are expecting a huge price on auction day, a low offer well below the expected price often arises the week before the auction. The agent does not expect the offer to be accepted, it’s more a case of causing the vendor to second guess their price expectations and be grateful when the price exceeds the bargain hunters low ball offer.
Move the tenants out – the more financially committed the vendor is during the campaign, the more likely they will accept the highest bid on the day. Moving the tenants out in the name of an ‘improved presentation’ also increases the vendor’s financial exposure to the campaign. Hence the real motive to encouraging landlords to move their tenants out
Deadline – sellers are often encouraged by agents to list for an auction. Apparently, as the deadline approaches, it pressures buyers to act. In reality, as the deadline (auction) draws closer, the pressure of the situation begins to shift from the buyers towards the seller. The buyer can wait for the next property whilst the owner is publicly on the chopping block on auction day. Don’t let a reported clearance rate of 80% fool you into a false sense of security. Many properties are withdrawn and/or fail to sell at auction, so the ‘result’ conveniently goes missing and unreported.
Hire staging furniture – when the owner hires designer furniture for 6 weeks, it creates both an expense and a deadline for the vendor. If a landlord, selling their investment property, moves the tenant out then leases furniture and commits to a $10,000 advertising campaign, they are committed to the tune of $25,000 on day one of the campaign, regardless of the result.
Upselling advertising – many agents are addicted to VPA – that stands for Vendor Paid Advertising. Industry training encourages agents that upfront VPA ensures they get a committed vendor from the beginning of the campaign. VPA comes in many forms. In the past it was full page newspaper ads, then it was real estate magazines & flyers and now the latest craze is ‘premium package” internet campaigns. If an agent really believes in these advertising methods, ask the agent to carry the cost and risk of the strategy. You may find the agent can quickly present a buyer to you without either of you having to commit to a massive upfront expenditure.
The greatest losses often occur at the time of greatest gains. It’s a reality that vendors are resilient and careful when the market is flat yet more relaxed and amenable to expenditure in rising markets. If you stay resilient and careful in a rising market, you are assured of the best possible net result.
By Peter O’Malley
Author of Inside Real Estate
Are you interested in reading Inside Real Estate by Peter O’Malley? Contact us to receive your free copy. Email: email@example.com or call 02 4822 8711