As the boom fades, the damage and pain caused by underquoting has shifted from buyers to sellers.
In a boom, a low price guide attracts an excess of bidders who all compete vigorously for the home. The sellers end up with a satisfactory price, one buyer gets the home and there are many devastated buyers who line up to have another go next weekend.
What happens when the price guide doesn’t attract the promised crowd of bidders? The pain of under quoting is transferred to the seller.
When a low price guide fails to attract the masses, the sellers face the ghastly scenario where they publicly pass in for a previously unimagined low price. Any chance of a high price is destroyed if your home passes in for a low price.
To fully understand how this can play out, take the campaign of a townhouse in Lilyfield. It was marketed in late 2015 for $1.6 million but remained unsold as Christmas rolled in.
The property was rested and turned-up in the New Year with an auction date and new price guide of $1.4 million.
On auction day, the new price failed to ignite the buyers’ interest, as it was turned in for just over $1.4 million. On the following Monday, after the auction, the property went back on the market for just shy of $1.6 million.
This unsightly fluctuation in price is recorded against the property advertised history for all time, possibly unbeknown to the owner.
A failed campaign creates a damning digital footprint for a property that can haunt the current and any future sales campaigns.
When a property is put through the wringer, like the Lilyfield townhouse example, the sellers can still achieve a good price, if luck goes their way. But it certainly makes it harder than necessary.
As the boom turns into normal trading conditions, its crucial to remember that the stats don’t always tell the full story.
Statistically speaking, prices are holding. However, there are fewer bidders per property in the current market than there were in 2015.
If you allow your property to be advertised for a low price on the promise that it will fuel buyer competition, be warned it doesn’t always go to plan. And when it doesn’t, the results can be devastating.
During a boom, a sale was assured for the vendor. It was simply degrees of success. Now that the easy money has tightened up, employing the right agent, with the right selling and pricing strategy, is required to achieve full market value.
An auction that stops well below the reserve price in front of hundreds of spectators (and buyers) is the surest way to destroy the value of your home.
Why would the agent advertise below the reserve price? Agents advertise properties below the reserve price because they know that the vendor’s reserve price is above market price.
Instead of being honest and highlighting to the owners that their expectations are ‘ambitious’, they under-quote to attract buyers to the auction. When the bidding stops below the reserve price, the agents will often pressure the owner to drop the reserve price to meet the market.
Some owners can see through this low-rank sales tactic and others succumb to the pressure on the day. All sales people know that the client can say ‘no’ one hundred times, but they only need to get a yes once to get a sale.
If you allow an agent to promote your home below the reserve price, beware, they may also pressure you to sell below your reserve price.
Accurate evidence-based pricing is required in the current market to attract the right buyers to your home.
The right buyers are people prepared to pay a good price for the right home. Sellers who attempt to bait buyers with a bargain price may get exactly what they asked for – a bargain price.