01 Mar How agents set values – Chris Blakeley
Most agents dread this question – “What is my place worth?”. Most sellers want more than its worth but they still don’t want to let the agent know what that price is so it becomes a battle. Chris Blakeley breaks down the agents task.
Kevin: My guest is Chris Blakeley. Chris is the regional manager for Raine & Horne.
Tell me, how do agents go about setting a value on a property, because that’s the one thing that someone wants to know when they call an agent up, what my place is worth?
Chris: And I think it’s important just to note before we go into that that agents aren’t registered valuers. What an agent does is we look at the comparable sales for the area, so we try to find a home that’s very similar to yours with fixtures and fittings, block size, bedrooms, bath, car, and we try and compare that to yours. But then we also try and predict what’s happening in the market in the future for the next three months, what’s going to be happening with the buyers.
So, quite often, we will have an optimistic view about what’s going on compared to the valuer who’s just looking purely at historical data.
Kevin: One of the things that most agents… Well, I’ll talk personally now. One of the things that really scared me was going to do an appraisal and that expectation of the owner wanting to know the price. It almost becomes like a competition, because my experience is that most sellers want more than their house is worth. Everyone has an over-inflated opinion of value. They have a right to expect that, but they judge the agent based on the price they give.
Chris: And I think it’s at that point that you go back to the agent and test their knowledge and get them to justify why they’ve come up with that price. If they have the facts and figures there, I guess you cannot argue with that.
Kevin: It’s difficult to change a seller’s mind, though, if they have an over-inflated opinion of value. The value of the property is not the only reason you should appoint an agent.
Chris: No, definitely not. It has to be the skills. It has to be the plan of attack that they have around the property of how they’re going to market it to find the best buyer for your home. Price is just a small part of it. At the end of the day, it’s not the agent that’s buying. You’re not buying it. It’s the buyer who’s out there.
Kevin: Let’s talk about auction and marketing for a moment. With the Internet nowadays, most agents, most smart agents who have a fairly good database, they collect lots of data on buyers, people they meet who come to open homes and so on, is it reasonable to expect that an agent may do a little bit of soft marketing before spending any money? That is going to the database and saying “Well, let’s just see if I can find a buyer for you?”
Chris: I think it’s really important to do that before you hit the market full noise. You invite that database of buyers in for maybe a VIP inspection prior to the open market coming to it. But a good agent will hold anyone who’s interested in that little group of buyers over until it is released, and that’s just to create that competition. We all know that competition drives price. Let’s get those people through, get the interested ones, and then take it to the first open home and then put them in competition with the rest of the public.
Kevin: Is it a misconception to think that the agents who get the most marketing – these are the ones who are most dominant, in either the Internet or on press – are the ones who sell the most properties?
Chris: Nine times out of ten, they probably are selling the most property because they’re meeting the most amount of buyers out there and getting them through your property. I guess they’re just covering all bases to make sure that they know they have you the best price possible.
Kevin: So, shouldn’t the agent be paying for the marketing?
Chris: Well, it’s like when you go to the mechanic, I guess. Do you ask them to pay for all the tools and oil and everything to service your car? All the agent is doing is asking you to give them the tools to do their job properly.
Kevin: How much should someone spend on marketing their property?
Chris: There’s no hard and fast rule. I guess it comes down to your situation, and I think the agent needs to acknowledge your situation, too, So, if you are very budget-conscious and they need to work with what you can give them, they should know every tool available to them in the market to make sure that they can hit as many people as possible.
Kevin: Is it reasonable for a seller to want to take the cost of the advertising out of the sale proceeds when it’s settled?
Chris: The commission and the marketing are two different things. The commission is a service fee. You are paying the agent for the work that they’ve done. The marketing is the tool. So, I think you have to keep those two things separate.
Kevin: There’s been a lot of criticism of open homes. Neil Jenman, as an example, has come out and said you shouldn’t do open homes on your property because it’s a major security risk. Is it a security risk? And if it is, how can someone protect themselves?
Chris: It’s always important to make sure you do remove all your valuables from the property before you have an open home. But I don’t believe it is a security risk. Agents these days are asking for your name, e-mail address, phone number before you’re allowed to enter an open home. It’s purely a security thing. If anything does happen during that open home or afterwards and the police need to be notified, we can say “These are the people who attended the property.”
Kevin: I think most people are reluctant to give all that information for fear that the agent is going to follow them up, but really, there’s nothing wrong with that; that is the agent’s job.
Chris: That is the agent’s job, and most of those buyers are going to be sellers one day and they’ll want to know that the agent is going to do their job.
Kevin: That’s a good point you make, because that’s actually how you can pick a good agent as one who follows you up well as a buyer.
Chris: Absolutely. I would expect a good agent would have at least touched base with that buyer that afternoon and probably again early that week just to gauge their interest. And it’s just because they’re doing their job. They want to give that feedback to the seller and say “This is what the marketplace thinks of your home.”
Kevin: As an industry, we know that all agents should follow-up. You should follow-up every buyer that you do. But you only have to go to an open house, as I do, from time to time. I don’t necessarily do it to test people out. I generally want to know what’s happening in the market. But it is surprising how many agents don’t follow you up.
Chris: It’s appalling.
Kevin: Why is that, if we know, as agents, that’s that is how we build a database?
Chris: I always say if you going out to select an agent, you secret shop them first, anyway. You go to their open homes and if they’re not following you up, they shouldn’t be on the shopping list.
Kevin: That’s a very good way to pick an agent.
Chris: Absolutely. That’s the first step that I would do when I was picking an agent.
As an industry, I think we need to acknowledge that this is what people are expecting these days. They’re expecting the follow-up. They want to know what’s going on with their homes once it’s listed. We really need to get better at that. We need to be doing our weekly reports and saying “This is the activity that I’ve done, this is what it’s created, and this is the feedback from it.”
Kevin: Yes. There you go. Great advice and if you’re looking to employ an agent, make sure that you secret shop them. The best way to do it is to go and check out a few of their open homes, maybe even go to a couple of their auctions and see how they perform at the auction, as well. Lots of things you can do, but don’t just judge it purely on the price they give you or how you perceive them to be in terms of their own marketing in the area. Test them out.