Steve Koerber's Old Blog

Remuera's house sold name since 1998 – 021864166

Frustrated with auctions? Want to know what the vendor’s are expecting?

Posted by Steve Koerber on October 19, 2009

Have you ever been to an open home and asked the question “What are the vendor’s expecting?”

In New Zealand we bring so many homes to the market that have no pricing, it’s no wonder frustrated potential buyers are always asking the same question.  

Auction, tender, by negotiation, set sale, expressions of interest, CV$920,000, POA, PBN, etc, etc.

The other day I had a conversation with a lady who came through one of my open homes.  The property was going to auction and she said to me in a very matter-of-fact manner “You’re the local expert, how much do you expect this home to sell for?”

So how does an “expert” answer a perfectly reasonable question like that?

I’ll analyse her question step by step:

Firstly, she was absolutely correct. I am the local expert.  I’ve sold more homes in the area in question than any other agent.  I look inside more homes than any other agent and/or property valuer.  I see more homes than buyers see.  If anyone has a reliable crystal ball I should have the Ferrari of crystal balls!

Secondly, I still have difficulty guessing how much it will sell for.  It is an auction and the market will ultimately decide the home’s fate (and price).  Sure I could have said to her “it should sell in the $1million to $1.1million bracket”.  Why am I reluctant to say that?  For many reasons –

1.  If buyer sentiment changes (due to unforeseen circumstances) between now and the auction most buyers might freeze.  This would affect the value.

2.  If interest rates went up or down between now and the auction some buyers’ ability to buy might improve or get worse.  This would affect the value.

3.  If all similar properties available for sale all of a sudden sold, this would affect the value.  Similarly if the market was suddenly flooded with similar homes, that would affect the value.

4.  If a neighbour who had won lotto decided they need the land to house their new fleet of luxury cars, that would affect the value.

5.  If a motorway extension close by was announced, that would affect the value.

6.  If there was only one bidder, that would affect the value.

7.  If there were 20 bidders, that would affect the value.

The most important reason I would be reluctant to say that it should sell in the $1million to $1.1million range is this:  In case it doesn’t!  If the owner is so realistic that they just want to cut it loose it could sell in the $900,000s.  How would the buyer feel when they call me after the auction, me having said $1mil to $1.1mil and I say it sold for $910,000?

Sure, the same person could come to auction, bid it up to $1,050,000 and then see it sail up to $1.2million.  That could happen, but how much control do I (or they) have over that occurence?  Litttle or none!

The market is the market and the value is the price offered by the highest bidder.  When it comes to guessing or estimating the value, vendor expectations are completely irrelevant.  I understand why buyers ask the question, but hopefully I’ve explained why it can’t and shouldn’t be answered.

One of the most profound things I have learnt (from Tony Robbins) is that the quality of your life is determined by the quality of the questions you ask.  If you ask “what are the vendors expecting”, that’s not a great question.  Most people ask it, I know why they ask it, but it’s not going to help you to buy a home!  If you re-phrase and ask “would the vendors accept $1,000,000?” then you would be asking a very good question and you would be more likely to get a realistic answer.  (If I know the answer to that question  I’ll answer it).

Still not convinced?  Still think I must know what every home is worth?  Give my crystal ball a try…..    crystal ball

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