If ‘buying the listing’ was the equivalent of a jab in boxing, then ‘conditioning’ is the right hook. This one-two combination is what some agents thrive on. But enough of the metaphors – here’s how it works.
The first step is ‘buying the listing’ which I explained in a previous article. Essentially promising an overly optimistic sale price to get the homeowner to list the property with them for sale.
But now the agent has the listing at that elevated asking price – what next? Do they go to work on buyers to encourage them to pay more? In an ideal world perhaps they would, but that’s not what typically happens. In any real estate deal there are two sides, the buyer and seller - each wanting to agree at the lowest and highest price possible respectively.
The trouble is that buyers and sellers come at the process from different angles. In my observation, buyers today are pretty well informed. They will research all the available listings online, research on sites like QV, OneRoof, Homes.co.nz, attend many open homes, attend auctions, talk to multiple agents, and perhaps even make offers on properties that are unsuccessful.
Vendors on the other hand tend to be less well informed. They are often unaware of what other properties sold for or how many similar ones are currently listed – they only care about the price that they want. And this price is often illusory, based on what they want to buy next, a margin over what they paid, or what the neighbour told them they should get. Frequently I hear the phrase ‘but I need $X!’. Sadly, the buyers do not care what you ‘need’ – only what it’s worth compared to what’s sold and what else they can buy for similar money.
With well-informed buyers often having a pretty clear idea of what the house is worth, it’s difficult to get them to pay considerably more. Vendors on the other hand are comparatively less informed about market reality. So, for the agent to close the gap between buyer and seller expectations, it’s the vendor they need to work on.
Remember, the agent has a window within which to sell your property and receive a commission (the listing period), so the sooner they bring buyer and seller together on price, the sooner the agent gets paid. The conditioning work can be thought of as ‘softening you up’ to lower your expectations. It starts off subtle enough and becomes more direct over time as the window begins to close.
Initial comments might include:
“buyer feedback from our open homes doesn’t see value at the level we’ve indicated.“
“the market has got quieter in recent weeks – fewer people attending open homes and auctions.“
“did you see the interest rates went up last week? That will soon be hurting prices.“
“two more houses were listed this week which are similar to yours and reflect good value – might need to sharpen the price here to attract interest.“
“I brought the rest of our team through, and the consensus was that value is probably a bit lower than we thought“.
Then it gets more serious:
“the price is simply too high now that the market has changed. We need to drop it to $X.“
“market conditions have changed and according to X (expert) are going to get worse.“
“this is the best offer you’re going to receive. The buyer is also keen on another property – so it’s now or never“.
“I feel like I’m wasting my time with this listing if you’re not serious about selling.“
“Well there you have it – the auction result speaks for itself, passed in at $X. Do you want to sell it or not? I can probably get the top bidder up to $X.“
So what is the answer?
If an agent is conditioning you with negativity shortly after taking the listing, then they must surely acknowledge that their appraisal was inaccurate to begin with. Unless there is a significant event such as a natural disaster, war breaking out, an economic shock, or unexpected Covid-19 lockdowns – there are very few reasons the value of a property would change drastically within a matter of weeks. The agent has simply over promised and is now trying to dig themselves out and salvage a commission while they still can.
That said, sometimes realistic value cannot be easily quantified before exposing the property to the market. In such cases buyer feedback is certainly valuable, and the agent and vendor should be having frank discussions about how to progress and potentially amend the approach at that point. Of course, this situation probably should have been foreseen at the time of appraisal, and the vendor made aware of what is likely to transpire. Such foresight and willingness to have honest dialogue up front constitutes professional service from your real estate agent and should be applauded.
Sadly, it’s sometimes all rainbows and positivity at the start, with storm clouds and negativity soon after. If the property was correctly appraised at the outset, there would be no need for vendor conditioning. Don’t put up with it.
Until next time.
Scott Morison, Registered Valuer