How much choosing the wrong agent can cost you?
Firstly, let’s go back to when our local market started coming out of the post Global Financial Crisis trough back in 2013. Lots has happened since then. For starters property prices have risen significantly as have the number of agents. Commissions have been deregulated which means that as sellers you have never been in a better position to negotiate on commission. The big thing that often gets missed in the commission discussion is the number of days a property sits on the market. Days on the market has changed significantly for the worse over the last 12 months. This is very important consideration while looking for an agent in the current market.
Last year in January days on market for Coolum Beach was approximately 59 days. By December that had stretched to 109 days. It literally doubled throughout the course of a year which clearly indicates that homes are taking significantly longer to sell. Now you might say "well that's not that bad, it's only 3 months" but, that's an average. That's a result of all those people you know that sold their house in 1 or 2 weeks combined with the people who took 9-12 months to sell their property. What you want to avoid as a seller is being the person that took 9-12 months. To put that in perspective in your family life everything has an optimum period where, if you exceed that period the outcome is considerably comprised. Just like your fresh fruit and vegetables that have been on the bench for more than a few days and are past their use-by date. It's the same with selling your property. We try to avoid sellers getting on what we call the 'Property Market Slippery Slide'. Which is, start high and finish low. Research clearly shows that properties which take longer than 60 days to sell, follow a trend of several price reductions and ultimately sell for less than market value.
So, choosing an agent. Let's get into the Top 4 common mistakes made by sellers.
1. Choosing the agent that quotes the highest price.
When appraising your home an agent can say whatever they like, just rolling out a figure without statistical evidence to support it. And some agents often do. They will quote a figure that they think will be higher than other agents may tell you. This is why doing your own research is important. Before I go to a market appraisal, I email the client a market review of houses that have sold in their area and surrounding suburbs. This gives the seller a couple of days to familiarise themselves with recent comparable sales in the area. You can easily go on to realestate.com.au or domain.com.au and research sold properties that are genuinely comparable with your property, thus giving you a general price range of what your property is worth.
Example - After research you think the property is worth about $700,000 and you speak with 3 agents. Two agents value the property between $680,000 and $720,000. The third agent values it at $850,000. This is the agent that will take you on the 'Property Market Slippery Slide'. Starting high and finishing low. Typically after one month on the market you will be asked to reduce your asking price from $850,000 to $800,000. After another month $750,000, then $700,000 and in the end, you will be many months on the market and due to "overexposure" you will be underselling your property. So be aware of the agent that quotes the highest price. Remember the standard period to engage an agent is 90 days.
2. Choosing the agent that offers the lowest commission
Generally, the offer of the lowest commission comes from agents who feel under pressure to ask for what they think they deserve. Usually they are lacking confidence in their ability. Commission can range from 1 percent to 3.5 percent. There is a great variable but, it's only about half a percent difference between one of two very good agents. Now, half a percent isn't that much in the grand scale of things. If your home sells for $700,000 half percent commission would be $3,500. However, it is proven that the difference between a good agent and an incompetent agent could be as much as 10 percent of the sale price - $70,000.00. I recommend not putting too much focus on saving $3,500 or $4,000 in commission when really the result comes from the end sale price. More on that later. Imagine if you save $3,000 on commission and you sell the property for 10 percent less than it is worth, the balance sheet doesn't work in your favour.
3. Choosing an agent based ONLY on experience
Every agent comes with their portfolio of achievements. Now, I am speaking against myself here because I am one of the longer standing agents in our area. When choosing an agent though, you need to look at what value they are adding. Sometimes the most experienced agent is also the busiest agent and the most time poor agent. In some cases, it is worth giving the younger, less experienced agents consideration. The only proviso. They have a good team of experienced agents around them. Some of the younger agents have less listings, more time on their hands and can dedicate themselves to your cause. They have high energy and they come with advanced technological skills. Ask yourself does this agent have time for me or am I just going to be a number in the system?
4. Choosing an agent without testing their negotiation skills
Let's go back to commission for a minute.
Example - An agent quotes to charge you 3 percent commission. The seller believes that 3 percent is too high because they sold their last house for 2 percent commission. If the response from the agent is that they will go back and check with their boss and maybe 2 percent will be OK, without engaging in any negotiations, then ask yourself - is this agent a good negotiator? Is this agent going to work on my behalf when the buyers are all trying to beat us down in price?
Another useful tip is to go back to when you bought the property. When you bought the house how do you think you went with the purchase price?
Example - Your house sold on this month 5 years ago and your neighbour bought a similar property at the same time for about 5 percent more. You feel you bought well, you scored a bargain. Do you think the agent you purchased off back in 2014 achieved a good deal for you when you purchased? If so, who do you think the agent was working for? The seller? You as the buyer? Or just for the deal?
Choose an agent that will work for you. An agent who will make sure when it comes to thrashing out the end price, you win the negotiation.