March 30, 2022 Luke Russell

HOW TO KNOW WHEN FAST SALES MEAN HIGH PRICES!

AND WHY SELLING QUICKLY IS AT ODDS TO MOST AGENCY BUSINESS MODELS

It’s no secret that most agencies are not built for fast sales.

In fact, fast sales are at odds to traditional agency business models. 

Here’s are the key reasons why selling fast and traditional real estate don’t mix well …

1. TRADITIONAL AGENTS, WHO DON’T HAVE A POINT OF DIFFERENCE, ARE ALWAYS LOOKING FOR THEIR NEXT LEAD OR LISTING

  • Selling too fast reduces the agent’s ability to meet and greet other prospective sellers as they come through the ongoing open homes.

2. TRADITIONAL AGENTS DO NOT WIN AWARDS FOR CONSISTENTLY FAST SALES

  • No agency in Australia wins awards or receives any form of industry recognition for consistently fast sales. Recognition is almost exclusively based around sales volume.

3. LONGER DAYS-ON-MARKET (SLOW SALES) ALLOWS TRADITIONAL AGENTS TO PRACTICE INCORRECT TECHNIQUES

  • Traditional agents (particularly those managing a high volume of listings) have conditioned both themselves and their sellers to ‘list and wait’ where they believe finding the right buyer, who will pay the highest price, takes time…lots of time. Nothing could be further from the truth.

4. LONGER DAYS-ON-MARKET (SLOW SALES) ALLOWS TRADITIONAL AGENTS TO HIDE INCONSISTENT PERFORMANCE

  • Focusing on sales volume as a validation of an agency’s success is easier than focussing on an agent’s actual success rate or performance consistency. The general public has been lead to believe that sales volume indicates that an agent is the most effective salesperson and is therefore the best choice to sell their home.

Agencies are rewarded (both at an industry award level and also at a social proof level) for sales volume.

The agent who sells the most must be getting the best results for each individual seller, right? 

When an agency isn’t built for fast sales, it’s only natural that the position they take against agencies who do sell consistently fast is ….  “fast sales equal under selling”.

"It is an urban myth that fast sales means low prices. The truth is the exact opposite."

All of the above said, here’s how fast sales can be a two-edged sword. 

This is when fast sales equal LOW PRICES …

  • When agents place a price on a listing.  This is where the use of historical local sales may reflect an incorrect market value to a seller. In many cases, sellers may be accepting a fast below-market (list) price and believe they have done well.
  • When there are low levels of buyer interest or buyer open home attendance.  This is where not enough market feedback has been obtained. When this happens both the agent and seller are flying blind and the offers may be much lower than the real market value. This is a similar outcome to undersold off-market transactions. 
  • When agents sell off-market or pre-market. This is where the seller and the agent use (potentially inaccurate) historical sales data as their reference point. Historical sales are often completely different to the current market value of any home and may be much lower than the competitive market value of the home.
  • When agents sell early in an auction campaign. Mixed messages, split focus and the difficulty of obtaining competing bids dilutes the competitive environment. 
  • When an agent has poor negotiation skills and the inability to manage multiple offers. … the very first offer any buyer makes is almost always NOT their best offer. 

This is when fast sales equal HIGH PRICES … 

  • When agents DO NOT place a price on a listing but they DO provide price guidance. 
  • When there is a high level of buyer interest. When the right process is followed it is very common for the levels of buyer interest, enquiry and open home numbers to supersede other local campaign buyer interest. 
  • When private treaty campaigns are used the competition is optimised. There is a greater chance of intense early competition.  
  • When an agent is an experienced negotiator and has the inability to manage multiple offers
  • When there are high initial open home numbers and the emotionally charged, competitive environment generate a high number of competing offers from buyers who are all incredibly motivated to secure the property.
"There is a massive difference between the actions and emotions of 100 buyers at the first open home compared to the actions and emotions of 100 buyers spread out over 10 weeks."

A final misconception … The Buyer Interest Curve.

Many agents will describe the ‘buyer interest curve’ as a bell curve instead of what it really is (see pictures below).

When agents describe the buyer interest curve as a bell curve they are simply saying that the level of buyer interest grows from a small level of interest at the beginning of the campaign to a peak high level some time later before the level of interest drops off again. Nothing could be further from the truth and the online campaign graphs in the case studies below clearly show it.

The reason agents would like sellers to believe that the levels of buyer interest grow over time once the house is on the market is so that they have more time on their side work their traditional business models.

The truth is that if you follow the correct process will NEVER have more people at ANY open home than open home number 1, and you will NEVER have more interest in your home than in the initial parts of the campaign.

The levels of buyer interest (when an agent uses a highly effective presentation-centric process) always start high and fall over time. This means that the optimal time to generate competition is in the initial stages of the campaign, not the latter. 

Believing that there is more chance of achieving a high price when there is less interest, lower buyer numbers and less compeition is at odds with the way probability and logic works. 

Year after year we have never had the levels of buyer interest look like a bell curve. 

Buyer interest starts high and starts early. This is why pre-market preparation is so important.

Above all else, the reason consistent fast sales means consistent high prices is …

  • 1. Sellers make the selling decision, not the agent. Sellers say ‘yes’ to early offers because the price is attractive. Would you, as a seller, accept a non-competitive low price just because the offer came in early? Of course not.

 

  • 2. Selling fast, and selling for a new price benchmark, should be the goal of every campaign. If the early offer is a genuine location record, and is over-and-above other recent private treaty or auction comparable sales, how could that offer ever be classed as under-selling? It can’t.
"While fast sales are NOT the goal of any campaign, consistent fast sales are the most objective measure of consistent high prices."

So, if you are trying to work out if the agent you are about to choose has a high chance or a low chance of achieving an above-market price, ignore all of the ‘agent speak’ and go straight to the data.

Look at the agent’s average-days-on-market for the last few years (not just the 2022 ‘hot market’ results that make almost every agent look good!).

Sales volume is meaningless if it isn’t accompanied by strong and consistent sales speed.

Here are just 6 of our 2021 location records that illustrate how selling fast and high prices go hand-in-hand.

4 Bed, 2 Bath, Acreage Cottage on 5 Acres

Online Campaign Views (realestate.com.au): Significantly higher than local market averages

Initial Open Home Numbers: More than 300

Number Of Offers: More than 20

Sold In Week 1

PRICE: $1,760,000 (location/suburb record for a 4 bedroom home on 5 Acres)

3 bedroom, 1 bath Californian Bungalow on 446m2

Online Campaign Views (realestate.com.au): Significantly higher than local market averages

Initial Open Home Numbers: More than 200

Number Of Offers: More than 20

Sold In Week 1

PRICE: $1,051,000 (location/suburb record for a 3 bedroom home)

2 Bed, 1 Bath Queenslander Cottage on 362m2

Online Campaign Views (realestate.com.au): Significantly higher than local market averages

Initial Open Home Numbers: 120

Number Of Offers: 15

Sold In Week 1

PRICE: $1,375,000 (location/suburb record price for any 2 or 3 bedroom home on land up to 550m2)

2 x 5 Bed, 2 Bath, Contemporary New Builds on 415m2

Online Campaign Views (realestate.com.au): Significantly higher than local market averages

Initial Open Home Numbers: More than 70

Number Of Offers: 12

Sold In Week 1

PRICE: $1,770,000 and $1,800,000 (location/suburb records for a 5 bedroom home)

3 Bed, 2 Bath Replica Queenslander on 530m2

Online Campaign Views (realestate.com.au): Significantly higher than local market averages

Initial Open Home Numbers: More than 150

Number Of Offers: 17

Sold In Week 1

PRICE: $1,105,000 (location/suburb record for a 3 bedroom home)

5 Bed, 3 Bath, Contemporary established home on 593m2

Online Campaign Views (realestate.com.au): Significantly higher than local market averages

Initial Open Home Numbers: More than 90

Number Of Offers: More than 20

Sold In Week 1

PRICE: $1,705,000

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