If you want an above market price for your property, agents have a number of tricks to bring you back down to a more normal market price.
Some of these tactics are subtle while others are more transparent.
Either way, when you know what they are, you stand a better chance of protecting yourself.
The pre-auction low offer – If you are expecting a huge price on auction day, an offer well below your expected price often surfaces about a week before the auction. The agent does not expect the offer to be accepted because it’s more a case of causing the vendor to second guess their price expectations and be grateful when the price exceeds the bargain hunter’s low ball offer.
Move the tenants out – the more financially committed the vendor is during a campaign, the more likely they will accept the highest bid on the day. Encouraging tenants to vacate in the name of an improved presentation increase the vendors financial exposure to the campaign.
Deadline – sellers are often encouraged to auction their property because the deadline (the auction date) can pressure buyers to act. However, as the deadline draws closer, the pressure of the situation subtly shifts from the buyers to the seller. While the buyers can wait for other properties to come onto the market, the seller 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 Many properties are withdrawn or fail to sell at auction, so the result conveniently goes unreported. The real clearance rate is always significantly lower than the figure advertised. Furthermore, the agent clearing a property and the vendor achieving the best possible price are two separate outcomes.
Hire furniture in – when an owner hires designer furniture for over 6 weeks, it creates both an expense and a deadline for the vendor.
Upselling advertising – agents are addicted to Vendor Paid Advertising (VPA). They often tell each other in training courses that upfront VPA ensures they get a committed vendor from the start. VPA comes in many forms. In the past it was full page newspaper ads, then it was real estate magazines and flyers. 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 deliver a buyer 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 boom markets.
If you stay resilient and careful in a boom market, you can be assured of the best possible net result.