With the weak housing market, auctions are experiencing low clearance rates. As a result many vendors are taking a DIY approach, going the private sale route in the belief that they will come out ahead by saving money on agents’ fees. However, this view just looks at the cost and not the value side of a real estate agent’s services.
The primary purpose of a Real Estate agent is to market your property and create competition between buyers.
The first step is presentation, ensuring that the home is made as attractive to buyers as possible. Owners can of course do this themselves if they have the knowledge and discipline. However, the real magic is in the layered marketing by the agents, which is very hard for the owner to replicate themselves. While the owner can advertise themselves, there are many media which only allow advertising by agencies, because of their regular custom.
Agents do not rely on a single media, but create campaigns across multiple channels which experience has told them are most effective. On the internet, they advertise on highly search engine optimised websites, so all a buyer needs to do is enter a suburb and the type of house they want to buy, and the listings appear.
The agents also have a database of buyers who have been looking unsuccessfully in the area previously, so they can contact people directly about the property. At open inspections, if a buyer indicates to the agent that this is not what they are looking for, the agent is likely to suggest another property they have on their books. If the agency is part of a network, buyers may be referred from affiliated agencies in neighbouring suburbs.
It is this network marketing that generates the competing bidders at an auction. The best result for the owner is when there are 3 or more bidders slugging it out to win the property. For an owner selling the home themselves, it is almost impossible to generate this level of competition, and so the owner is left to negotiate with individual buyers and the longer the house is on the market, the harder it is for the owner to resist dropping their prices.
At this time of the cycle, a lot of properties are passed in at auction, although most sell within a week because the agent has flushed out any interested parties due to the marketing campaigns and a negotiated sale can be made. Someone considering a private sale may believe that this means the owner has wasted their money, but the owner has still made a sale within a reasonable timeframe. The likely hood is that in a private sale, the time it takes to sell is considerably longer. This also has a cost, particularly if bridging finance is needed to cover the cost of their next home.
When we sold a property last year, there were three people bidding right to the end. The sale price was at the top end of the valuation range about 8% more than I was expecting, well over the selling costs and of course it sold on the day.
And that is why I like real estate agents.
May Your Business this Year be - As You Plan It.
Over to You. What do You Think? Post Your Comments Below.
Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.
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