Valuation or Speculation?
‘So, what do you think this place is likely to fetch?’ It’s the question every agent expects to answer when pitching for a new listing. How the agents answer this question should be more important than what they answer.
When interviewing agents, many people unintentionally favour the agent that quotes the highest price. This sets up a scenario where they overlook pertinent details of the agent’s appointment, issues that seem insignificant at the time of signing the agency agreement.
When explaining where your property sits in the market, does the agent talk about hard fundamentals such as recent sales evidence, economic conditions and key market indicators such as days on market, median prices, bidders per property? Or do they talk about speculative elements such as ‘a buyer the agent knows or a buyer that could pay….’.
Or ‘someone will love this home and definitely pay a premium for it’.
Flattery is the oldest form of persuasion.
Agents that use feelings and hunches to speculate about what a specific buyer may pay are merely fly fishing for a listing.
If you were to employ an independent valuer to assess your home, the price they quote you is supported with evidence. A real estate agent that talks about what a buyer could pay for your property or what may happen on auction day is simply speculating on events.
Sometimes agents turn the interview process into a bidding war against their competition. It becomes a case of who can quote the higher price to the owner. Unsurprisingly, this selection process by way of bidding war backfires on the vendor.
Ultimately the agent needs to find a buyer that will sign a contract at the quoted price.
There is a real estate sales trainer that runs a course titled – ‘Get the listing, priced right’. As he says, ‘the first part of this course is to get the listing. You can price it correctly once you have the listing’. Vendors need to ensure they are not wrong footed by this deft sidestep.
The Cambridge Dictionary defines a real estate agent as ‘someone who arranges the selling, renting or management of homes, land and buildings for the owners’.
The obvious omission in this definition is valuation. But that’s how many home sellers inadvertently treat agents – as valuers. In suggesting that agents not be primarily assessed on their valuation figure is not to say the agent should be blissfully unaware of market prices. It’s more a case of accepting that you employ an agent for their marketing and selling skills not their opinion on market price.
Being objective about the value of your home is challenging. Knowing all of the wonderful benefits of the home as you do, it’s easy to then think in terms of ‘higher value’. You may be right too. However, pricing too high during the campaign can have a detrimental effect. The key to creating buyer competition is to quote an accurate market price that engages the maximum number of buyers.
BY PETER O’MALLEY Author – Inside Real Estate
