Soothsayers Have No Say In Real Estate
By Craig Lowe
WOULDN’T it be great if we could see into the future? Imagine using a crystal ball or a time machine to invest in the share market or pick the winner of the next Wellington Cup?
We all know that’s the stuff of science-fiction but you’d be surprised how many people still think real estate agents are clairvoyant.
When we market a house by tender, the first question just about every buyer asks is: “What’s it going to sell for?” Ultimately we simply don’t know. That’s the whole point of a tender: to let the market decide.
We tell sellers and buyers alike to think of tendering as an internal process rather than an external one. Don’t get hung up on what the rateable value is or worry too much about what other people might offer. The rateable value is an external factor that has no bearing on what the property you want to buy -- or sell -- is worth, and what other people will pay is unknowable in advance.
Even if an agent had an opinion on price, it is almost certain to be wrong. We can’t predict what other buyers may be prepared to pay or know in advance how much competition there’ll be for a listing. There’s no way of knowing that, whether you’re an agent, seller or buyer.
Tendering is effectively a no-price marketing strategy -- the owner has chosen to let the market decide and not to provide an expectation or a price. At the same time, if you advertise a property without a nominal value, you risk alienating or confounding buyers: they may think the house is more expensive than it is or, conversely, that they can afford something better.
Usually, we include the RV when we market a property if it’s at an attractive level or we have some kind of guide – “buyer enquiry over”, “offers invited from…” – but nothing that will cap the price. Some sellers can be very nervous about using the RV when they think their house is worth more.
But if you start out with the price you hope to get, you’re going to put off buyers before they have a chance to even see the property, let alone fall in love with it.
So don’t be nervous if your RV is a little bit lower than where you want to end up.
Similarly, buyers should make their own value judgment rather than rely on anyone else’s.
Use the information in the marketing as your starting point but bear in mind there are far more important factors to consider. What else have you seen for sale? What have you offered on in the past and what was the final selling price? How does this house compare to those? Ask the agent for recent sales data and analyse what houses have sold for rather than their RVs or asking prices.
Weigh up what the houses offer but ignore their RVs – NEVER compare a house’s RV with its sale price. That is the wrong way to do it. What you should be assessing are the features of the house that sold versus the features of the house you want to buy.
So rather than ask the agent to predict the future, go back to market fundamentals.
Think about at what point would you be disappointed if you missed out? And at what point you wouldn’t care because you wouldn’t have gone that high anyway?
That’s how you determine your ultimate price. Will it be enough? Only time will tell.
If you’re thinking of selling and want the Right Value for your house, call me on 021 764 647 for a free no obligation appraisal.