We live in a DIY world where sophisticated technologies are designed for the average person. Today, anyone can take stunning photographs, design their own website, or post news clips for the world to see.
And sell their own house? Sounds like a good idea, especially if you can pocket the agent commission. But what are the pitfalls of going it alone? Lodge managing director Jeremy O’Rourke, marketing manager Kevin Walker and host, residential and lifestyle sales consultant at Lodge Megan Smith, discuss this topic on an episode of Lodge’s Home Truths podcast. Read on to gain a few of their insights.
Research carried out by REINZ revealed that on average, private sales were 15% lower than those gained by professional agents. With the average New Zealand house price sitting around $950,000 (as of the end of May 2023), 15% represents well over $100,000 of lost value.
Why the difference? What is it that good agents do that private sellers either don’t or can’t? Jeremy explains.
“Getting the best house price is a numbers game. It’s all about creating competition. The more people interested in a single property, the more likely the ensuing competition will drive up the selling price.”
Homeowners who sell their own properties typically do so on Trade Me. The belief is that because thousands of people use Trade Me, sufficient interest will be generated to create the necessary level of competition. From experience, Jeremy knows that creating competition isn’t that simple.
“It can be a complicated process bringing potential buyers to the table. Good agents use a wide range of online platforms, including property-specific sites that aren’t available to private sellers. Realestate.co.nz and OneRoof are two good examples. Good agents will also coordinate campaigns for a single property, which helps drive up buyer numbers.”
In a market with more buyers than stock, urgency is almost a given, especially for agents of larger companies who have far greater access to target audiences and buyer numbers.
But what about when the property market softens? When buyers believe that time and opportunities are on their side, a good agent can still create urgency. Kevin explains the dynamic that frequently plays out.
“When a Lodge agent shows a buyer ten properties, it is likely that only one house ticks all the boxes. After all the time and energy spent looking, a sense of rarity is created, as well as a fear of missing out. Often, that’s all needed to persuade the buyer to act. With only one house to show, private sellers have no such leverage.”
Different methods of selling
Private sellers typically sell by tender, inviting prospective buyers to submit offers by specific deadlines. It’s the easiest method.
The problem is that it doesn’t always yield the highest offer. If the market is right, auctions can deliver prices well above expectations, but as Jeremy points out, running an auction is anything but simple.
“Creating palpable competition is the key to a good auction. Before the auction, agents work hard to find buyers and help them understand the value of the property. This includes guiding them into position to be able to bid on the day.
“It is this unseen work that produces the cleanest offers, and while experienced agents know how to run this detailed process, it is beyond the skill of most private sellers. That’s not a criticism – there are simply a lot of moving parts to a successful auction.”
Increasing the perceived value
The perception of value is an intangible factor in gaining the highest price for a property. While private sellers do their best to make their homes presentable, a key variable for creating perceived value is often missing: targeted buyers.
As head of Lodge’s marketing team, Kevin knows the value of taking a more specific approach.
“After an agent assesses the unique qualities of a property, they create an accurate profile of the people whose desires align with those features. With a target audience to aim at, a well-resourced agency will then use its digital fluency to locate the right buyers. As Jeremy said earlier, it’s a numbers game, so rather than rely on a single online channel, we coordinate a campaign to funnel the correct buying groups to the promotional materials.”
“There’s another advantage to having a clear target buyer in mind. The average house needs a little work to bring it up to speed for sale, but if we know who we’re trying to attract, we can focus on the improvements that will yield returns.
“For example, if your house and location are suited to young families, that may influence how the home is staged. Repairs and upgrades may also be directed by the target audience, and photography would likely emphasise certain features over others.”
The danger of underselling
After decades in the property sector, Jeremy understands the art of negotiating the highest property prices and know the pitfalls that await private sellers.
“In a rising market, it’s still possible to leave money on the table through a lack of buying competition. It’s all about filling the funnel, and having a coordinated campaign that utilises multiple online channels is the key.
“Another reason why private sellers often undersell is the difference in focus. Private sellers tend to look for buyers, whereas good agents look for the person who's prepared to pay the most amount of money. It’s a subtle difference in targeting, but it can be worth tens of thousands of dollars, sometimes more.”
The bottom line
It can be tempting to go it alone when selling your house, and saving on agent fees is an attractive carrot. But do these gains make up for the loss of the collective experience and resource that a large agency like Lodge delivers?
A potential 15% drop in value is something to think about.
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