How some agents cause sellers to lose thousands of dollars.
by Neil Jenman
Article written and provided by Neil Jenman from Jenman.com.au . To see the original source of this article please click here. https://jenman.com.au/its-not-the-market-its-the-method/. Neil Jenman is Australia’s trusted consumer crusader. He can support you, all the way, from choosing an agent who will get you the highest price guaranteed to when your removalist comes! You get an unprecedented level of total support. All for free. To find out more visit jenman.com.au
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In case anyone’s feeling sorry for those real estate agents moaning about no one bidding at their auctions, consider some behind-the-scenes facts.
FACT 1 – NEEDLESS EXPENSES.
For every home that fails to sell at auction – at least 70 percent of them – there is a homeowner who loses between $5,000 and $10,000 in needless expenses.
Each weekend there are around a thousand such homeowners. These are people who have been convinced (a better word would be ‘coerced’) into selling their homes by the worst possible method (especially in a falling market) – public auction.
Right now, homeowners who are selling by auction are collectively losing between $5 million and $10 million each weekend. That’s between $250 million and $500 million a year.
The financial carnage being witnessed each weekend is not due to Mr. Albanese or Mr. Chalmers (as many agents claim). No, it’s due to the agents and the auctioneers, most of whom are too greedy or too dishonest to tell the truth about auctions.
How many times – after a failed auction – do you hear an agent say, “That was a terrible waste of money for these home sellers. They just lost $7,000 in advertising costs. Plus, they had to pay the auctioneer another thousand dollars.”
And let’s not forget the staging costs which are increasingly “essential” to selling a home – that’s another $5,000. At least.
And if a home doesn’t sell the first time, many sellers go for a second ride on the auction merry-go-round with a second agent.
But failure can soon become a habit, especially in a falling market.
One seller in Melbourne is now on to their fourth agent. They’ve lost $58,000 in expenses. Another on Queensland’s Gold Coast has spent $60,000 on advertising costs.
As repeatedly stated, this scam of getting sellers to pay advertising costs is an Australian invention. In almost all other countries, sellers pay nothing before they sell.
But not in Australia where all risks are passed on to the sellers – or at least to the inexperienced sellers who don’t reject this scam.
To profit from the losses of clients is highly unethical. Especially if those losses are caused by advice from agents.
FACT 2 – AUCTION LEMONS
But the greatest losses for sellers whose homes fail at auction come after the auction.
These are the auction lemons that are now becoming increasingly common.
Buyers, if you are looking for a bargain in today’s market, check out the auction lemons. These poor sellers, who often own beautiful homes, have had their home stigmatized – or branded, if you like. In the minds of many buyers, these homes must be overpriced or something’s wrong with them.
But neither is the case.
The only thing wrong is that the sellers selected the wrong agent who chose the wrong method.
In a boom, it’s easy for agents to hide the truth about auctions. The sellers seldom realise that the buyers would have paid more.
But when gloom times arrive, the truth is painfully revealed. Thankfully, however, it’s easier to spot the worst agents when times are tough. The worst agents are the ones that still recommend auctions.
FACT 3 – BUYERS HATE AUCTIONS
Buyers hate auctions.
Research from the 1990s (Swinburne University) right up to the 2020s shows that at least 90 per cent of buyers detest auctions.
So why would any competent agent choose a method that buyers dislike?
The answer is simple. Auctions enable agents to condition sellers down in price.
But auction is also a method that, because it’s hated by buyers, means that many more of them stop turning up once the market stops booming.
Buyers have now got more homes to choose from. The urgency has gone out of the market. Sanity is returning, that’s what’s happening.
Buyers can now enjoy what has long been denied them – time to do research. To think about what they will buy and how much they will pay.
Most buyers are not scared that prices will fall further – at least not the best buyers, those who are looking for a lovely family home. What they call their “forever home”.
To these buyers – who, incidentally, are still the best paying buyers – the beauty of a home is what’s most important. When they find the right home, most pay a good price for it. They know that, in the long run, prices will recover.
Respected research has also shown that around 80 per cent of salespeople in most industries are incompetent. This is due to what’s known as “the warm body approach”. Unlike many professions where people spend years at university, all most salespeople need is a warm body to get hired.
The best agents are those that have the intelligence to reject public auctions. The best agents are those who don’t leave sellers thousands of dollars out-of-pocket if the agent can’t sell their home.
So, the fault of buyers not showing up at auctions is not primarily the budget, the prime minister or the interest rates. The reason that buyers are not turning up is because the buyers hate auctions.
They don’t have to buy at auctions anymore. They can wait and watch as incompetent agents persuade inexperienced sellers to choose the worst method of selling.
And then, when homes become auction lemons, savvy buyers swoop in and buy a lovely home at a bargain price.
It’s not the market that’s the main cause of buyers not going to auctions. It’s the method.
