By Kirsten Craze
Whenever the property market makes any sudden movements, selling agents need to rely on their finely-honed pricing skills, or lean on the expertise of the mentors around them.
The 2021 price boom, now followed by a rapid price correction, has been one of the fastest U-turns the NSW property market has ever seen causing confusion and uncertainty for both vendors and buyers alike. Sellers are often stuck on prices their neighbours achieved in the peak, while buyers are simultaneously keen to bag a bargain amid media reports of bubbles bursting.
This is when the true art of pricing comes into play and experts warn this is when careers and reputations can be made - or broken - through reckless or deliberate over or under quoting.
Overpromising leaves vendors underwhelmed
With low stock levels in some markets, the competition is fierce to secure a listing. Braden Walters of Belle Property Byron Bay/Lennox Head, and Chairperson of REINSW’s Residential Sales Chapter Committee, said despite the market turn around, some agents are still suggesting unachievable prices to their clients.
“We've gone from such a bull market in 2021 to an adjusting market now and in that time some agents have gone out and bought themselves a fancy car and taken on a lot of their own expenses. Now they're doing anything they can to pay for all that, and unfortunately, it’s the clients who are going to be the ones worse off,” Mr Walters said.
He added that with a slower market, particularly in some regional locations, it could take two or three agents to sell a property.
"They've got a 90-day agreement and if they can't get it done then it passes to another agent, but that all happens because they don't get the price right upfront. The clients aren't doing anything wrong; they’re guided by these agents’ professional advice. Unfortunately, there are agents putting their own interests before the vendor’s."
Mr Walters said some sales agents wrongly believe conditioning the seller - the act of over quoting and then gradually bringing the asking price down during the life of a campaign - is a necessary evil in a changing market.
“What we're finding here is that a house might be currently worth, say, between $1.5 million to $1.6 million and agents go to an appraisal and tell the owners that’s what they’re going to get. But then you get another agent who comes in and says ‘No, I can get you $1.7 million’ so of course the owners get all excited and engage them,” he said.
“Then they spend all of this marketing money and months on the market only to have that agent then condition them to accept something around $1.5 million - the amount the original agents were saying. These agents are simply ‘buying a listing’ and it's not fair, but it's quite rife.”
Under quoting leads to industry distrust
Betty Ockerlander, of McGrath Epping and a REINSW Residential Sales Chapter Committee member, said a shifting market can also lead some agents (both the inexperienced and ones that should know better) to overquote to vendors to obtain the listing and under quote to buyers to pull more buyers through open homes.
“My feeling is some appear to want the easy way out. They don't want to negotiate with multiple buyers or educate them on where the market is. They find it easier to set a low price on the internet and bring a bunch of people through the door and then convince their vendors that what they are offering is all their property is worth,” she said.
“So they’re getting lots of people at open homes, but the buyers are from a lower price bracket and cannot stretch higher, but they all wait and come because it looks like great value for money, but they're not actually the right buyers.”
She added that savvy agents take the time with their vendors to find the price sweet spot.
“Show them comparables and let them know you’re obviously working to get at the best level of those, not the worst. We need to help them understand there's never going to be something that’s exactly the same as their house.”
Ms Ockerlander said she would support a more transparent price guide system in NSW like that used in Victoria where agents are required to provide a statement of information with an indicative selling price bracket.
“I’d prefer that way of listing where everyone has a visible guide. I put guides on almost all of my properties, but it makes it really hard to be transparent when you have agents around you seriously underquoting. Ultimately it makes our listing look like poor value and it makes the public dislike agents when they continually miss out on a house they thought they could buy,” she said.
Finding the right balance
To foster great relationships among both vendors and buyers, as well as ensuring career longevity, a skilled agent should listen before making an appraisal or beginning negotiations.
“It's about finding that motivation, asking your vendors why they’re selling. If they're going to buy and sell in the same market, then price is almost irrelevant as long as they minimise the gap in their transaction,” Mr Walters explained.
“Then I would focus more around the strategy. Nobody really knows where exactly the price will land but if you have the right strategy to maximise that dollar amount then you should be happy in the knowledge you found the best out of the market for your client.”
Whether it’s over quoting or under quoting, agents who systematically miss the mark on price will not go the distance according to Ms Ockerlander.
“They don't last. Many come in when the market is high, and they want all the glory but don’t want to do the hard yards when the market changes. They don’t want to do the right thing morally and think it's just a money exercise rather than providing the best service,” she said.
“It takes years to learn pricing. You can’t just start in real estate and be able to price correctly, you need to really work at it.” Ultimately though, the buyer decides the price based on what other buyers believe it is worth.