EASY FOR SELLLERS
By Ray Wood
Every night, millions of homeowners around the world put their head on the pillow and wake up wealthier than the day before. That’s the magic of real estate.
I like real estate because I’m familiar with the forces that influence its value. I know why some homes are popular and others are not and how to make the necessary changes that can turn an unpopular property into a desirable opportunity.
I also like real estate because I can have a direct influence on the way a property looks. I can update floor coverings, paint colors, improve the garden, make small rooms look bigger and stage a home to make it look like it’s straight out of a magazine.
I can create a look that makes buyers go “WOW!” That’s my thing.
Most property sellers and agents understand that you only get one opportunity to market a property correctly.
If you get the formula wrong at the start, the whole campaign will be problematic.
Obviously, an Auction is only going to work if there are more than two interested buyers and it’s the agent’s job to create this scenario.
Here are the main reasons why Auction is a highly successful selling method:
Why set a limit on what a buyer will pay for your property? An auction starts at a base price estimate and works up with no limit. A ‘For Sale’ asking price limits buyer interest and also limits a potential sale result as most offers are normally made BELOW the initial asking price.
A property is at its most interesting when it first hits the market because it’s fresh and new. The problem, however, is that most new listings come on to the market at a high or optimistic price which turns buyers off. On the other hand, a property for Auction hits the market at a lower price, which is more likely to encourage a buyer viewing.
More buyers become aware of the property.
Buyers shop on price. The nature of an auction is to begin low and rise from an estimate at the bottom of the value range. This attracts more buyers. A traditional ‘For Sale’ listing normally starts off with a higher or optimistic asking price which means fewer buyers become aware
More online buyer interest.
Online marketing usually dominates a good Auction campaign, so starting with a conservative base price estimate will generate extra traffic because most buyers will use a price range in their search criteria. For example, if my preferred buying range is $600,000 to $650,000 my search is going to miss a property listed for sale at $750,000
More buyers see inside the property.
Once a buyer moves beyond looking at the property from a computer screen or mobile device and actually sees inside, one of two things will happen: They will either ‘warm-up’ on the listing and seek more information, or cross it off their list. If they ‘warm up’ they will start researching values and decide what the property is worth to them.
More buyers become emotionally motivated to buy
So far, more buyers have become aware of the property and more have actually seen inside. They’ve been thinking about the property a lot. In fact, they are so emotionally invested with the opportunity of actually owning this home that they can think of little else. This is what I call MMI or Mentally Moved In. They see themselves living in the property and enjoying all its features. They see themselves as the next owners and that’s where the magic happens.
Buyers notice other buyers are interested
When a property sits on the market for sale with minimal buyer interest and viewings, there is really nothing to motivate a buyer to make an offer. On the other hand, a good Auction campaign that generates multiple buyer interest creates a buzz as buyers notice other buyers are interested.
An Auction provides a deadline for action
An Auction date and time delivers a fair and specific ultimatum to interested buyers and delivers two very powerful marketing features; Chance of gain and fear of loss.
An auction contract is unconditional
As a rule, an Auction bidder is buying unconditionally meaning their purchase is not subject to getting a loan or a building inspection. Buyers need to satisfy themselves before bidding and signing a contract that they are able to purchase the property and will be doing so without further conditions.
People want something other people want.
Have you ever gone to purchase something only to discover it’s sold out? This happens all the time and it’s human nature to want it even more when you know others want it too. It’s the same with property. When a buyer is interested in a property and witnesses others interested buyers, their interest level is increased.
Cruising above the reserve price
The magic happens once bidders know the reserve price has been reached and the highest bidder will be buying the property. This is their opportunity to stand and deliver. The auction will then continue until only one bidder is left.
How to avoid price drop fatigue
A buyer can quickly discover the marketing history of any property for sale. They can see the date it first came on to the market and also find out successive price drops.
If you’re looking to buy and you see a seller has continually reduced the asking price over time, you can easily tell there’s been little or no interest. I believe this does untold damage to the ultimate selling price and can easily be avoided.
I call this price drop fatigue and tragically it’s a common mistake made by many owners and agents.
In fact, if I’m buying real estate, I will target a property that has been on the market for a long time because I know the owner will be more likely to accept a low offer.
Any agent will tell you, in most cases, the longer a property has been for sale, the less it will sell for
The buyer inquiry ‘wave’
An agent knows that marketing property is actually two specific tasks. The first task is to attract buyers. The second task is to have buyers physically view the property.
With traditional real estate marketing, a property will initially be listed at a high and sometimes optimistic price. This does a few damaging things in my opinion.
First, the high price will usually limit the number of buyers who become aware of the property. The second is that starting high means the seller risks missing the buyer inquiry wave.
The Buyer inquiry wave measures the level of buyer interest on a timeline.
Any agent will tell you that the level of buyer inquiry usually peaks within the first 2 weeks of being on the market. But if your price is high and not on the buyer’s radar because they are not searching in that price range, the seller will completely miss the best marketing window.
Ask yourself this question: If you were selling, would you prefer one buyer or five?
Agents are under-quoting property anyway
I’ve noticed an increasing trend to list a property below a realistic selling price in order to engineer a bidding war.
The result is a short selling campaign with lots of buyer interest. So far so good. But here’s where the wheels fall off this strategy.
The standard practice is that once the agent has multiple buyer interest, they inform each buyer that the seller has instructed them to invite the best offer on the best terms and give a time and date deadline.
The buyer is informed that they only have one chance to submit their best price so they better make it a good one.
In many cases, this is a tragic scenario resulting in a property that is sold well below what a buyer would have paid.
Why not give buyers as many bids as they want to become the highest bidder and ultimately, the buyer? It’s a proven formula that works.
No recommended retail price.
Selling real estate by action works because real estate has no specific recommended retail price.
Let’s say you decide to sell your car. Unless it’s a rare and unique vehicle, buyers will have a number of choices to purchase a car just like yours with similar mileage, features and the same year and model.
In other words, the price you can expect to sell for is completely dictated by supply and demand and other similar cars for sale at the time.
Not so with property.
For the most part, all homes are different and unique. Even a condominium in a multi-unit complex will have different features and a different view.
Furthermore, every owner has the opportunity to influence their selling price by the way they present their property for sale.
A let’s keep in mind that we buy residential real estate on emotion and justify with logic because it’s never hard to justify the purchase of something you really want!
A couple of Auction myths exploded
1. Auctions are only for sellers in a distressed situation
This is a myth continually promoted by agents who either don’t understand the auction process or have a vested interested in advising against it.
Every day, billions of dollars worth of real estate is successfully offered for sale by auction. In fact, many ‘distressed’ sellers achieve amazing results with a sale by auction.
I’m the first to agree that not every property, seller, market or situation is suited to a sale by auction. But many are.
A good and experienced auction agent will be able to walk you through the advantages of each selling method and how, as a seller, each one might work to your advantage.
2. An auction seller is forced to sell at the best price
Garbage! An auction will deliver a selling opportunity to the property owner. They are never forced. It’s their decision as to whether they accept the best price offered or not.
Ray Wood is a Co-Founder at Fairfast. He is a fourth generation real estate agent and auctioneer. His book, How To Sell Your Home For More has sold more than 300,000 copies over 17 editions. Check out Ray's popular real estate podcast at TopAgentsPlaybook.com