Steve Koerber's Old Blog

Remuera's house sold name since 1998 – 021864166

Privately sellers can lose bigtime

Posted by Steve Koerber on July 8, 2009

stk20561pwhWhenever I sell a popular home at auction I receive lots of phone calls after the event.  The calls are mainly from buyers who were unable to bid due to their circumstances.  People often want to know how much a home sold for so that they can compare it with others they’ve seen (or are likely to see) on the market.

One of my recent auctions attracted around 400 people during the 3 week marketing period.  The auction had 8+ registered bidders and sold for a great price. 

Early on I knew that if the auction program was correctly managed, I would achieve an exceptional result.  Several pre-auction offers were submitted.  In consultation with the owners we agreed not to sell circa $500,000 and to wait until auction.  They agreed, we waited, and sold for much more at $537,500.

From day one I was keen to prove a very important point with this auction.  A very similar home nearby (but not renovated) sold  a month earlier well under $500,000.  That home wasn’t auctioned, had 2 or 3 offers submitted and sold within days of hitting the market.

I had a great opportunity to prove that the logical way to sell a popular home is by auction.  If you’re a potential seller, please note that the owners of both these homes paid a similar fee to their agent.  My point is this – my owner got much better value, for the same cost. (Yes, I have an ego , they chose the right agent).

But that’s not the end of the story.  After auction sales I always ask my callers to guess the sale price before I tell them what it was.  This is a fascinating exercise and the range of guesses is always huge.

After the above auction I received a call from a fellow who was keen to know the sale price.  His guess was $500,000 or $510,000.  When I told him $537,500 he was shocked that it was so high. 

I then discovered that he had just accepted a private offer under $500,000 for his house nearby.  That is why he was shocked!  He was thinking – Have I under-sold?  When he asked if I had similar homes available for him to buy, the reality of the situation dawned on him.  Even if I did, there were 8 people lined up to buy it.  Scary but true.

As a seller, if you really know the market and have your finger firmly on the pulse, selling privately might be a real option for you.  My concern for you is this:  if you misinterpret market conditions you might be surprised how much a good agent could get you for your home.  Especially at the moment in Auckland, it’s important to make people compete for the right to buy your home.

The selling process needs to be managed carefully from day one.  I hope this story demonstrates the value a good agent (and a good process) can add.  If you’re selling privately in this hot market, there’s a big chance you’ll lose money.

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3 Responses to “Privately sellers can lose bigtime”

  1. James said

    My concern with your quote “it’s important to make people compete for the right to buy your home” is that you achieve this by driving people to auctions with false expectations of the potential purchase price.

    • James that’s a brilliant point that you make and one of the failings of the auction system from a buyer’s perspective.

      The interesting thing about my market is that a $1million house could easily be worth $900,000 one month then $1.1mil the following month. It often depends who is there to buy. For example if 5 people all think a house is worth $900,000 and you put them in compettion with one another, the house is likely to sell for more than $900,000. I’m sure you’ll agree with that. If you get 3 of the 5 buyers living with their in-laws while they desperately search for a new home, the price could go wild to $1.1mil or similar. Emotions play a big part. If I don’t get buyers in that or similar desperate situations, the seller might not get so lucky and have to accept $935,000 or similar. You see how fickle markets can be? See how hard it is to accurately price a property month to month?

      Regarding your note about ‘driving buyers to auction at unrealistic expectations’. If I told buyer A that $935,000 might be enough to buy the house at auction, would I be misleading her? If I told buyer A $900,000 might be enough would I be accused of driving buyers to the auction with false expectations? If I advise a buyer the house is $1mil+, they decide not to come to the auction, then the house sells for $935,000, I get abuse from them in a sad no win situation. In that scenario I would accept responsibilty for mucking up bigtime.

      If a nuclear bomb was dropped somewhere and world peace took a turn for the worse, which way would the real value of the house go?

      The bottom line is that I never know exactly what a house will sell for. It can vary enormously for the reasons described. If a buyer thinks the house is worth $800,000 and wants it, I might tell them to come to the auction because they “never know they’re luck”, plus they’re entitled to their opinion. Am I misleading them? All I can do is give them recent sales data, which I do. Then it’s up to them. It’s the market that decides the final price, not me, not anyone else.

      Thanks again, I’ll be putting a summary of the above with the info I hand to every potential auction buyer. Let me know your thoughts on my response to you.

  2. […] of this should directly translate to each individual Real Estate Consultant / Marketer having more dedicated time per vendor / listing on average to spend with buyers & sellers than in other […]

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