Who do you think can give you the most accurate estimate of what a house will sell for at auction? An estate agent or a buyers’ advocate?
No prizes for choosing the advocate, but why? Why are so many agents so wrong so often? Why can we, weeks ahead of an auction, so often predict what its result will be?
Truth is, too many agents just don’t know how to price the market. Their view is through rear-vision mirrors while we are looking at the three main factors at work in what a property will sell for:
- What the property is worth
- What it will be worth in the future
- What people can afford.
We typically get to 20 or more auctions every weekend. The apparent inability of agents to come close in their estimates is stark, stark, stark.
How do they explain results such as these:
- 20-22 Winter Street, Malvern Originally quoted at over $3 million (can we hear you laughing?). The land alone is worth $3.2 million and while the house has some problems, we told our clients it would go for around $3.5 million. It sold for $3.47 million.
- 2 Wynnstay Road, Prahran Originally quoted at $1,150,000. We advised our clients not to buy ( it had issues), but it should sell between $1,350,000 and $1.4 million. It did.
- 805e/126 Rouse Street, Port Melbourne A very good apartment, quoted at $750,000 plus. We had identified five bidders prior to the auction and told our clients they would need $820,000 to buy it. It sold for $816,000.
The lesson for the day:
If you do your homework – if you study what similar properties have been selling for in the same area, if you question other people you see at inspections and find out who the real bidders are, if you get a feel for what their budgets are – you will be far closer to the likely result than any indication an agent will offer you. It is then that you can approach an auction with a realistic bid in your pocket and have a real chance of success. But if your budget only meets the agent’s figure, disappointment beckons.
And then came …
52 Avoca Street, South Yarra Offered privately for some time with expectations of around $10 million. $7 million is more like it, we thought, the place is as dark as a cave. It finally went up for auction on Saturday, was passed in at $6,850,000 then sold for just over $7 million. (It sold to someone who had seen it for the first time that day – just shows how well a mammoth advertising budget can work.)
News from the war zone:
A couple of weeks ago, we opened a new front in the underquoting war. Since then the ACCC has announced that serious-money fines are on the way. Now Consumer Affairs Victoria has (at last) entered the fray and raided the offices of a number of agents who may have been underquoting, the REIV has hit reverse gear and it appears they’re trying to put their house in order; and it looks like quoting price ranges is history.
All well. All good. But the real cure – mandatory publishing of reserves – is yet to be implemented. That simple step would end agents’ overquoting to vendors to get their business and then underquoting to buyers to entice them to auctions. And, judging by the number of bids made even after properties are declared to be on the market, it would not depress results.
David Morrell
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Bayside: Excitement takes a break.
With the expected exception of Bentleigh, there was quite a lot of not very much happening in Bayside over the weekend. Not many bidders, not many watching.
Bentleigh? Two passed in out of 15 offered. Cain’t win ’em all.
Beaumaris had just one auction – 14 Cromer Road $880,000 won it – and two private sales at over $1 million: 1 Anita Street sold for $1,060,000 and 1 Reid Street for $1,150,000.
In Black Rock, 28 Iona Street sold for $1,230,000. 52A Stanley Street sold after auction for $1,330,000 and 53 Second Street was passed in on a vendor bid of $1,220,000 against a reserve of $1,300,000.
Brighton had mixed results, but nothing outstanding:
25 Lynch Street sold prior to auction for $1,570,000
14 York Street is still available. A vendor bid of $1,100,000 was later matched by a genuine $1,100,000 bid which was declined. Reserve? Undisclosed. Why?
7 Esplanade Avenue again went to auction but did not fare much better than its previous attempt in February. Once again it was passed in $1,450,000. No bids, but at least this time a later offer of $1,465,000 is on the table. The vendor is holding out for $1,550,000.
Brighton East performed a little better than Brighton Proper: five sales from five auctions, if you include 15 Marriage Road selling before auction for $2,760,000.
12 Mackie Grove was the best result on the day. $1,389,000 bought it. (The agent’s quote was $1,150,000 plus.)
Hampton had one scheduled auction at 71 Service Street, but pre-auction negotiations resulted in a prior sale at $935,000.
Private sales were more the go in Hampton: 1 Bronte Court sold for $1,250,000, 39 Imbros Street brought $1,520,000 and 1/35 Willis Street changed hands for $1,470,000.
Next Saturday brings a true test of the Brighton upper level auction market: a rare beach-front property at 2 Cole Street. Local intelligence suggests that despite the agent’s quote of $5.5 million plus, they have $6 million well and truly covered and have hopes of $6.5 million.
Underquoting? Well, a mill here, a mill there …
Yet there are signs the message is getting through, at least to some agents. There are those we have spoken to who acknowledge that there is a problem and that it is one they have made for themselves. And then there’s the indignant few who continue to defend the indefensible and blame everyone from the media to the buyers’ advocates.
Kids, we did not create this problem and we’re doing you a favour by trying to put an end to it. If you’re looking for someone to blame, take a hard look in your mirror.
And of one thing you can be very sure: if you don’t fix it, others will.
Until next time.
Damian Taylor
M&K in the news:
Media Watch. You may have seen the ABC story Dirty Little Secrets about Fairfax bowing to the agents and taking down Marika Dobbin’s story about the Dirty Little Secrets of real esate agents. If you read the story itself (here) you’ll see its source: David Morell
The Age. It’s about agents not knowing what a property is worth (again).
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