This morning, reading the Brisbane Times, I came across an article titled "What went wrong The Block?" The author (Kevin Turner talks) about prime time renovation show "The Block". The show's finale last Sunday highlighted the state of the current real estate market - 3 out of 4 properties passed in at Auction. Turner makes the point that the panicked conclusions of pundits that the proverbial sky is falling and the real estate market is in meltdown – are somewhat overstated.Turner suggests, I believe completely accurately, that the real reason the 3 "block" properties failed to sell was the lack of knowledge on the part of the show's producers of the state of the market for those properties. The pricing and reserve for each of the auctions was set by producers who clearly didn't have a sufficient connection with agents: these agents had actually advised that the reserves were unrealistic and that the properties would be most likely passed-in at auction.
Agents that don't communicate with their vendors
The problem with the properties on the show was fairly unique: the producers were not accessible to agents. This serves to highlight the importance of communication: in the real world, vendors usually are available, and it is the role of the agent to effectively communicate the state of the market and give the vendor realistic expectations about the price they will achieve for their property.Even though volumes and prices have both fallen, the property market has not come to a shuddering halt: last week the REIV reported auction clearance at 57%. There is a slowdown, and buyers have more power in the market, but that does not mean that an agent can abdicate their responsibility or compromise on their performance levels. Agents that use the current market to their advantage by communicating well with their vendors, should be able to achieve similar or better sales results.It is a tried and tested "truth" among agents that vendors have "unrealistic expectations" about the value of their property. Whatever the market situation, the role of a listing agent is to educate their seller about what the market (i.e. buyers) is saying about the pricing of their property. For agents that communicate well, solid reporting of buyer feedback in the current climate potentially puts a listing agent into a more important position than they would be in a sellers market: they are equipped with often overconfident feedback from buyers that are "low balling" properties. Finding a compromise between the the position of the buyer and the seller is the next step.
A day in the life of...
Let's work through an example:
- Say a property is priced by vendor and agreed by the agent at $500,000
- In the first week there are 8 inspections, price feedback is $460,000, $470,000, $465,000; none of the people who inspected the property make an offer;
- In the second week there are 6 inspections, price feedback is within the same range as the first week, 1 buyer enters an offer at $460,000 which is rejected by the vendor;
- In the third week there are 4 inspections; price feedback is the same; no offers are made
- In the fourth week, there is a single inspection; the buyer makes an offer at $465,000 which is rejected by the vendor.
In this scenario, the agent has clear, recorded indication from "the market" that the property is likely somewhere between $460,000-$480,000. The rate of inspections is decreasing and the vendor has chosen not to negotiate with buyers at a realistic price level. If the vendor's agent has effectively communicated each week the specific price points quoted by buyers, the number of inspections, attendees at open homes etc., that agent will have an arsenal and a vendor well prepared for a price reduction to meet the market. It should be clear to both the agent and the vendor, that the property is unrealistically priced.To the agent that has not communicated this feedback or has done so intermittently, all the vendor will remember is two "lowball offers". The agent's work and the clear position of the market will be completely obscured for the vendor. In this scenario the vendor becomes upset at the agent’s lack of effort and list the property with another agent. This scenario accounts for our observation of a much higher listing turnover rate in the current market.For good agents, listing turnover and unrealistic vendor expectations should be used as tools to help improve their performance, rather than as excuses to account for poor performance.
Rex's Vendor Feedback Reporting tools can help
Rex has powerful tools to effectively communicate buyer and market feedback to vendors. Our simple interface encourages frequent entry of inspection and OFI feedback against individual listings and for specific buyers. Rex keeps each buyer that has inspected or dealt with a property up to date with price changes. With two clicks, Rex can prepare a comprehensive vendor feedback report detailing all reported feedback and buyer interactions with the vendor’s property.For agents that are less focused on reporting feedback, Rex is a godsend.Judge for yourself: one of the agencies using Rex has recently been named the top agency for exclusive sales in Victoria and Tasmania for a major Australian and International franchise group.