You are sitting at the poker table, and all the players are trying to hold the perfect poker face. Each player knows what cards they are holding and what they are prepared to gamble. Take a step back and think about real estate as a poker table - the players are playing that same game - except the stakes are a lot more significant!
The old school rules of the real estate game are the same as poker. Hold your cards tight to your chest, don't show any emotion, play cold and keep your poker face on so the agent does not know how you feel about the property, and how much you are willing to spend.
The irony of this game is the Seller (vendor) and the potential purchaser both have a price in mind before any negotiating or bidding begins. So here is our poker real estate table:
The vendor - They do not want the agent to know how low they will go, for fear of the agent trying to undersell the property.
The potential purchaser - Also does not want the selling agent to know how much their budget really is, because they want to buy the property at the lowest price possible, and they don't want other buyers to know how high they will go.
The selling agent - Stuck in the middle partially blind folded from both sides. They are being asked to quote a price, and no one is telling the agent “the truth, the WHOLE truth and nothing but the truth.”
So how does the agent play the game that they are meant to be in control of??
Facts: By law the agent needs a signed agency agreement before listing the property for Auction or Sale. This must have an estimated range of the property value. The agent, by law should be quoting prices inside of the range specified in the agency agreement. There is a large loop hole here that agents jump through all the time, they use YOUR feed back to quote "BUYER INTEREST HAS BEEN…”. the potential purchaser gives a low ball figure to try and bring the agent price expectations down and also not show their cards. So the agent quotes this figure "interest has been around...." relaying what price guide you have told them. This price has nothing to do with the vendors expectations or the reserve at auction OR what you are really willing to buy the property for. This is where we as purchasers, shoot ourselves in the foot!
Consider this scenario.....
You see a property at 112 MadeUp Street and love it! The agent Jo Blow asks you what you think its worth?? Not wanting to show your cards you say “Yeah maybe around 1.5 million” in the back of your mind you are thinking “this will sell for at least 1.8 million, and I have $1.9m to spend on it“. The agent will now advise all people entering the property that “Feedback has been around $1.5m”. The vendor agreed to put $1.8m-$2m on the agency agreement but will put a reserve of $2.1m for the Auction. The agent is NOT under quoting, but rather regurgitating your false numbers and being blind sided by the seller.
The agent, buyer and seller are now all playing poker with different "price cards", all hidden, and the agent is still blind folded. Buyers are creating issues as much as the vendor is and no one has any clarity for the real price a property will finally sell at.
When is under quoting really under quoting.
Now we are back to the real world...You inspect a property, the agent says "the price for the property is $1.5m+". The vendor has clearly stated to the agent, they will not sell for less than $1.8m and the agency agreement states a price range of $1.8m-$1.9m. This is a true case of under quoting. This can be reported to Fair Trading and agents are being fined for doing this. This type of black and white under quoting rarely occurs.
Will under-quoting ever stop?
It is highly unlikely to ever truly change. Buying a home is a massive emotional purchase - the biggest one you will probably ever make in your life, and agents know how to play this emotional game. By choosing their words wisely, a "poker under quote" can get a buyer to fall in love with a property and then push the buyer beyond their comfort zone at an auction. As some agents quote "quote low, and the buyers will flow!"
Level the playing field
As a property buyer you need to understand the price quoted to you at an inspection. What are the recent comparable sales? Does the agent typically try low ball pricing quotes? What is the current market situation? Are you dealing with a diamond agent that get prices way above vendor expectations? What else is for sale in the market at the moment that is similar?
The best way to level the playing field is to get a professional on your side when buying. Sellers use a professional, so should you! Why you may ask? When a selling agent is talking to a buyers agent, it usually means stripping down the emotional facade that normally goes into a purchase. It is in the selling agents best interests to give the buyer agent the "real price" and see if a deal can be struck that meets in the middle of a fair market value for a property. Buyers agent works with the same set of informational tools as the selling agent, and have spent years studying the way each agent works and the market fluctuations.
If you are in the market to buy, and want expert insight into strategies of agents, and the advantage of having objective information call us at BuyEast, we have proven to give buyers the advantage needed to sure their perfect investment property or next home.
Mark Cadry 0414388464 mark@buyeast.com.au
Nicky Cadry 0416232268 nicky@buyeast.com.au
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