7 figure Attraction Agent
Tom Panos interviews leading real estate attraction agents. These agents share their strategies for writing 7 figures year after year. Simple, powerful and effective - you can apply these tips to grow your real estate business today. For more FREE tools visit: www.tompanos.com.au
7 figure Attraction Agent
What is the 'Vendor Price Discount Error' Phenomenon? 🗞️ Real Estate Market Wrap
- 00:00 – The market is in the mood for rate drops
- 01:15 – The 'Vendor Price Discount Error'. Two reasons why there will always be a gap between the list price and the sale price (even in a boom)
- 08:21 – What are the cheapest areas in Australia to buy a house?
- 09:07 – The difference between a ‘Trusted Advisor’ vs the ‘Overpromise & Undersell’ Agent
My Clearance Rate: 12/12. Some even sold for $200K above reserve
I mean, the auction day's, the fourth week, the campaign's over, so what are you doing? What's my view of the real estate market at the moment? It's good. It's balanced to above balanced market, and what we're seeing is things are selling. And why is that happening right now? Because we are in the mood of rate drops. We are in the mood of rate drops. We are in the mood of rate drops and because we're in the mood of rate drops, the buyers are coming out there. And I'm not going to say to you that there's enormous levels of stock out there at the reserve, and when I say $200,000 more than the reserve, these were reserves that were pretty aggressive because they'd had a lot of interest on those properties. When I looked at those reserves, I thought they are aggressive and the owners were prepared to be flexible on those. But we are definitely seeing hey, george, good to see you we are definitely seeing a marketplace where the sentiment is that rates are coming down and that it's pretty good.
Speaker 1:Now I want to let you know that yesterday I was having a conversation with a real estate journalist and it was about the subject of vendors who have to correct price, and what it was about was why do vendors have to correct price? Why should there be a reduction strategy right? If a real estate agent does the right thing, why should a real estate agent be encouraging a vendor to reduce their price, particularly in a for sale context? So let me run through some interesting statistics. What percentage of properties in Australia do you think sell for lower than the listed price? What percentage of properties do you believe according to CoreLogic RP Data? I mean, I don't have a relationship financial relationship with RP Data, but I use their app. I'm not an ambassador. They are probably the leading data company and they've got some incredible data sets that you can look at. And one of the most unlooked at by real estate agents is called the vendor price discount error Good term.
Speaker 1:So John Dyer says 95% of properties that are listed get sold for lower than they're listed. John, guess what? You're pretty spot on and that shouldn't come as a surprise. So why? Why, even in a good market, do the majority of properties 95%, says John. The data set that RP Data has, that's a couple of years old, says it's 75%. But that doesn't obviously include properties that are auctions, because auctions don't have a list price right. And then when those properties get sold. You can't work out the variation, but based on my own auction business, I have a look at what percentage of those properties get sold for more than what the owner wanted originally, and I would say it would be a small minority. So I would actually say, john, that number of 90% is probably where it's at. So think about that concept for one moment.
Speaker 1:In Australia, 90% of the properties that get sold get sold at a lower figure than what the owner was hoping for when they've listed it. This data set is available on CoreLogic. Why does that happen? So why does it happen? Why is there a gap between the list price and the sell price? Well, let's go through it. There's two reasons. There's two reasons. Reason number one, and the main reason, is that nearly every owner will want more for their home than what it's worth. That's a fact, end of story. Every owner also believes that their kid is the best looking kid in the world and every owner thinks that their home is worth more at the start. That's why real estate agents exist to help an owner either get that big hope price or at least get educated on what market value is, so that they sell at a fair market price.
Speaker 1:So what is the average level of discounting? What is the average level of discounting? Roughly 5% across the country and discounting changes based on marketplaces. So when you look at a balanced marketplace like we have now, right now we've got a bit of a balanced marketplace and that is stock comes on, it gets swallowed up in reasonable times and I've got to say to you, roughly, for a balanced marketplace, it's around the four to 6%. That is the discount level.
Speaker 1:When you've got a marketplace that is a buyer's marketplace right, when it's great for buyers and that means that there is sorry when it's you're right. When it's a buyer's marketplace, when you've got a lot of stock, a lot of stock and it's great for a buyer, what's the discount level? 10% plus. That's why, ladies and gentlemen, you've got to be an outstanding vendor manager in tough marketplaces. If you're working right it's not the case for me today right, it's not the case for me today. And in a marketplace that is a seller's marketplace, a marketplace where there is hardly any stock and there's lots of buyers, that's called a seller's marketplace, that's a boom. And when you've got a boom, believe it or not, you still have a vendor discount because vendors, even during a boom, still want to get more. It's human nature and I have to say, oh.
Speaker 1:By the way, people ask me what is the biggest discount level areas? Now, that's something good to look at. A suburb in Townsville called Heatley is around 11% right. So when you go around the country you have a look at it and there's some great data sets. You can get them from sqm, um, rp data, all the companies now and all the big portals, domain, rea, they've all got uh data companies. But I've got to tell you in if I had to go look at it nationally. In summary, in terms of discounts, melbourne has got 17 suburbs that offer discounts 10% plus over. It's been a very challenging market, less so in Sydney and Brisbane, in Sydney and Brisbane.
Speaker 1:And I've got to also let you know, for those of you that are sitting there watching this right now and are saying to themselves, what is the cheapest area in Australia to buy a house? Well, let me tell you, I'm going to give you the three lowest median prices in Australia at the moment. If you want to get into the market, but you really don't have a lot, let me run through them Rockhampton, geraldton and Devonport Devonport in Tasmania. So I've got to say to you it's so important, it's so important, it's so important, it's so important, um, um and there's a and there's and there's a. It's so important that you understand whether, at any time, what marketplace that you're working in.
Speaker 1:Now what I want to do is go through because this is the conversation I was having with the journalist yesterday. I was making the distinction between what an agent that is, a trusted advisor, house price maximizer, agent is Verse. Let's call it the conditioner, let's call it the agent. That's not the trusted advisor. Let me go through what a trusted advisor agent does in the management process and, by the way, that was the other conversation I had with her.
Speaker 1:I despise the word condition. It's a word that I don't use. You would never have heard me use that word. I despise it because when I think of the word condition, I see it as a word that's got manipulation. I see it as having a word that's got a lot of fear. I see it's got a word that, basically, is about the agents interest, not the vendors interest, and I see it having a lot of Commission breath. So, at the end of the day, if we make the assumption that every vendor is going to try and get more than market value.
Speaker 1:At the beginning of the process, we're going to need to understand that a real estate agent is going to need to be very good at the vendor management piece, and I want to run through. What is it? Yes, trevor, still suntanned, because that's what three weeks of sun gets you when you're not in Australia in winter. So let me run through Number one, and I want to make it really clear. If we had to make the distinction between an agent that is a trusted advisor and make a distinction with an agent that is the overpricer let's call it the overpricer conditioner the two biggest qualities that distinguish them are intent and transparency. Intent and transparency. Let me run through.
Speaker 1:If you are the trusted advisor agent in the vendor management process, because you're going to have to be really good at helping vendors accept the reality of the marketplace, because, depending on what part of Australia you're in and the kind of property you've got, your vendor is going to have to be aligned right which is a nice word for price correction or price reduction by two to 10% to sell based on the data set. And how are you going to do that? Well, firstly, I do think that every vendor should be given the opportunity at the start to go for a higher figure, and the reason I say that is we see it as real estate agents every day of the week Certain properties are out of line sales, they'll go for more, whether it's an auction or it's a private treaty. Today, as an auctioneer, I see properties that had reserves of 2.4 sell for 2.6, right. So every property deserves the opportunity right at the start, for a week or two if it's a for sale to go for the higher figure. But every vendor also deserves the integrity and respect and the transparency to be told.
Speaker 1:If we're not getting that number early on, we need to adjust the campaign and the excite figure, because I've got to let you know. If you don't adjust price early in a campaign and you adjust at week three I mean the auction day is the fourth week the campaign's over. So what are you doing? You're making the property attractive. After all, the buyers have seen it and left. You've got to do it early because all real estate agents know peak audience on a property is in the first 30 days.
Speaker 1:You never get a second chance at making a good first impression and I can tell you what bad real estate agents do is they overcook properties. They leave them overpriced. They leave them overpriced and then when they adjust, five weeks later, six weeks later, the market's gone. They've moved on, people have moved on. The listing starts getting stigmatized and people start saying, oh, there's something wrong with that. And then what actually happens is you get this dysfunctional relationship between the agent and the vendor. Because the agent had gone in and overpromised, the vendor realizes it's not happening. So the communication breaks down and eventually you know if they're desperate they'll sell, but they'll sell unhappily. But a lot of the times they won't sell and then they'll give it to a second agent and then that makes it even worse because the whole marketplace says, oh, that's been on the market for months, that's gone from agent to agent.
Speaker 1:So let me just run through what the trusted advisor, vendor, managing agent is like. They're an educator. They're one with transparency. What they do is when they sit at a listing presentation, and that's where the process begins. At the listing presentation they'll sit there with an owner and they'll say to the owner hey, I want to let you know you're hoping to get $1 million. I understand that. I've got to let you know. That would be a wonderful number to achieve. I also have a lot of buyers that have got $1 million and $1.1 million budgets that I can bring through. The comparable sales that I have with me are indicating that it's probably under that number. Here are my three comparables. They're showing me somewhere along the lines of nine or thereabouts, but I need you to know, mr and Mrs Vendor, in the first instance.
Speaker 1:We know that there's an opportunity to go out there to get a heart buyer and if we get that heart buyer we normally get them right at the start. They're an emotional buyer and they've been waiting on the market for the right property. An example of a heart buyer is the buyer who property. An example of a heart buyer is the buyer who has family, who lives in the street already and they want to buy a home in that street. I'll paint you a heart buyer that I had four weeks ago. House street in Bankstown gets sold for top dollar. I find out the girl that bought it lived two doors up, was brought up there, had got married, had moved out, had separated, had moved back home, didn't want to be back home but needed to be near her parents to help with babysitting and what have you as a single mum because she was working, so she bought the house Right. So, ladies and gentlemen, I've got to say to you that's the heart buyer and I think that every property deserves the opportunity, deserves the opportunity. Yes, david Gray. David Gray makes a good point.
Speaker 1:Maybe don't overprice to get the listing to start with 100%, because I was going to say the second. The second thing that causes so much of the stock in Australia, which we said is about 90 percent, that sells for lower than the list price. The first one is that all vendors want more money. The second one is that there's always a Larry the liar out there in most marketplaces. And I've got to tell you, larry the liar goes in there. They're not the trusted advisor, they're the ones that go in there. Oh, I think I've got a buyer that's going to buy this property for 1.2. Sign here right, quote it high to the vendor. That's what they do. They buy the listing.
Speaker 1:Now I've got to say to you I despise that, because what you're doing, if you're a Larry the liar, you're causing a lot of damage to the vendors in your marketplace, because what they're doing is they're going off thinking to themselves oh, this person's so confident of getting me this price, that they then go off looking to buy their own property based on what that agent has said, they build their hopes up. Bad scenario this happens they end up buying a property. Then they can't sell their property at the figure that the agent says. Then that agent you know the one, I'm talking about, the conditioner what they do is they've got that vendor signed up and they know that that vendor's got to sell because they're desperate. So they'll eventually transact. That vendor will walk away with a soul by sticker, but they're not going to walk away with a smile and they're not going to walk away telling their neighbors they're happy and I've got to let you know I'll be very surprised whether that agent will ever get any referrals. If anything, they'll lose business because of the way that that relationship ends up going. So the best agents I know are the ones that go in there. They will actually go and try for a week or two at a higher figure in case there's a heart buyer emotional buyer out there, buys from the heart, emotionally, and then justifies it logically, like that girl that I said to you a month ago at Bankstown.
Speaker 1:Now the secret is within moments, and I'm talking about not months. I'm talking about weeks, week one at the latest. Week two, if you haven't got great engagement and you haven't sold the property, you've got to re-look at price, because I don't care where the property is. When you adjust the price, the magical buyer appears and I say adjust it nice and early. And the reason why is, if you don't and you adjust it at week three, week four, you basically destroyed the campaign when you've got the peak buyer behavior looking at it there.
Speaker 1:So just on a high level, what is it that a good, trusted advisor, vendor, agent does? Let me run through it. Number one is that they handle price at the listing presentation in the way that I said. They give them hope, but they also tell them what the probable figure is and they set them up because it's the unexpected that lands heaviest. They set them up that they are going to be having a conversation with them addressing the feedback and the buyer intel. Now if it's an auction property and I've got to tell you you get bombarded with buyers on the first week, like, let's assume you get 50, 60 groups through and the engagement and the response to the number that you're quoting is good and it's being accepted, you have a moral obligation then to actually adjust the price up, not down. You adjust the price up, so good real estate agents are always adjusting, but generally speaking, because vendors want more and because there's always a Larry the liar in the marketplace, you're generally going to be adjusting down after a couple of weeks.
Speaker 1:The other thing that great trusted advisor real estate agents do in the marketplace is that they've got transparency, and that transparency forms in a communication plan that is coupled phone, face-to-face might be zoom, written report, whatsapp group and they are being bombarded with information in the moment. So the vendor is getting Intel, which they didn't have at the time of listing, and a real estate agent needs to be bringing that Intel to the vendor because that information wasn't available at the time of the listing but it's been available after you started marketing the property. So they've got to be good at doing all those things. Now let me tell you what the bad agents do, the conditioning agents do. They're the ones that just go in there and they turn around and they say, hey, listen, we'll get you 1.2. At no stage do they ever sit down and put down the probable figures. So they mislead the owner and, as I said to you before the distinction, there is intent and lack of transparency, then what they do is they have a plan. The conditioning part, the manipulation part, is just go in there and just give them bad news, bad news, bad news, bad news. Wither them away. Wither them away with the view that they eventually will crack. And sometimes they do because they have to sell if they've got financial stress, or if they're they bought elsewhere, or if there's a family separation or what have you. So, team, when do you adjust If you've gone in with a higher figure at the start? Thank you, aaron, it's good to be back. Malcolm Quinn, good to see you.
Speaker 1:Trust-based advice is grounding your violence in fact-based analysis. That's right. It's also about knowing your own data set, knowing your own ratios. Feedback should happen straight away. I believe the first strategy session should be and some people call them, you know, set to sell meetings, expectations meetings. Your strategy session should be held very early, after you've had your first set of buyers through, after you've had your other real estate agents from your office that have come through, so you can be giving them that feedback.
Speaker 1:I think when you're giving feedback to owners, I hate agents that are, you know, warm and fuzzy when you're giving feedback to owners. I hate agents that are, you know, warm and fuzzy. Oh yeah, oh yeah. No, man, you be clear and concise. You be like a doctor. You say it as it is.
Speaker 1:There are too many real estate agents that mix the relationship between friendship and business. They are not looking for a new friend. When they called you in for an appraisal, they didn't call you because they were looking for someone to hang out with on Saturdays. They called you because they wanted someone that was a heavy hitter, that could get them from stuck to unstuck. They had a problem and they needed a Panadol. You're the Panadol and the Panadol is basically being evidence-based, talking data and being clear, and stop trying to be saving every vendor. I mean the market's the market, the market's the market. The market's like a tree. It's got its own branches. It thinks the way it thinks. You are not the message, you are the messenger. And what I'm saying to you be a clear, concise messenger. Be a clear, concise messenger.