In the last few weeks there have been some results that have left people baffled and lost faith in the real estate system. The market is hot, everyone can understand that, but on the flip side, when bidders are outbid by 1.5 million dollars, they are asking serious questions. Whilst the result of the strong market is largely driven by investors, and low interest rates, there needs to be a happy medium with how much things are able to go out of a price range or ultimately should we just eradicate listing prices all together?
Real estate is one of the only markets where it is entirely set by the public, the person who is willing to pay more gets it. Whilst that can be reassuring for both the vendor and purchaser, where the system falls down is when things are so out of hand that they lose any form of relativity. An agent can't help it if an investor who has never seen the property turns up and is willing to pay a million dollars more for a property, but here are the reasons eradicating listing guides could provide further clarity.
1. The current system is not working: We have tried the whole system of setting quotes, the reality is they don't really work. Whilst some properties fall within 10-15% of this, the results in recent months has shown these quotes to be almost fictitious. And, with it being a market where vendors are profiting, it does seem that sometimes even when the vendor has quoted something along the lines of $350,000-$400,000 they are still unhappy selling when the home gets to $355,000 - therefore it's ineffective at the moment.
2. People will start to trust agents more: Currently, agents are the ones bearing the bad wrap for listing prices that sky rocket and go out of control. The agent is supposedly responsible for setting a price guide that was unrealistic, but in their defence, how could they predict that the price would go gang busters once two or three serious bidders got involved. Eradicating listing prices will clearly demonstrate the agent isn't underquoting, which is what a lot are accused of at the moment.
3. They can be replaced with an open reserve price: A much more effective way to advertise listings is with a public reserve figure. The only reason that it wouldn't be published is because with a hot market, vendors get greedy and want the right to reserve their judgement in case people pay more. Whilst that is fair enough, to encourage fairness and transparency, if the vendor disclosed a figure to the public, it would provide a ball park figure. If they say it is on the market at 1.2 million dollars and it goes to 2 million, the vendor can openly say that the market dictated that it was worth that, and if buyers in that lower bracket get blown away, that's their tough luck.
4. They can be replaced with a valuation price: One other way to cover the agents back is if appraisal prices were made public. This doesn't indicate the exact price guide, but if an independent valuer was able to provide their opinion on what the home was worth, and it was public knowledge, it would set a parameter. What the buyer then decided to pay would be up to them, but it would not be judged of an involved parties price guide who was set to benefit in the commission off it.
Whilst these are just suggestions, the market has never seen this level of demand, it is unprecedented and when changes of market conditions come like the current ones have, it is important the market responds as well. Removing listing prices, might make for a few more awkward discussions and also for a more convoluted buying process, but it will ensure that agents are protected in their processes and that they are not seen to be manipulating the market.
There are other alternatives in how listing prices can be provided, or guides can be given without making buyers feel that they are either being lied to, or being told that something is affordable and then being blown out of the water. This will prevent upset prospective purchasers, and provide more control back to the agent to indicate that it is market based demand driving these prices, not agents.
About the Author:
Todd Schulberg handles all things marketing for Homely.com.au - Living and breathing property, Todd has a keen interest in the movements in the market and how agents can utilise new tools and technology in order to be more connected. Using all things social, Todd suggests different ways that agents can engage and think outside the square with their marketing approach.