Expert Agent Wrong By 30% & Why You Should Not Rely On Guide Prices
Who saw this article on Domain published recently?
Now, I should state that I didn’t see this property in the flesh, nor did I track the local Paddington market to write this article - I’m simply picking up on the typical media hype when a property sells well over reserve to break down what may of transpired and how it can be avoided for buyers.
Facts we were told
- The home was marketed with a guide of $4 million after being revised up from an initial guide of $3.8 million.
- Vendors reserve price at auction was set at $5.1m (+27.5% above the agents guide price)
- Sold under hammer at $5,650,000
- The property last traded for $2.4 million in 2010 (10yrs and 8m ago)
- Records show the price of Paddington houses has more than doubled in a decade.
Buyers sweating on paying $3.8-4.4m, had fair expectations too given what the agent was quoting buyers right? Well, they would be bitterly disappointed to see how this ended on Saturday.
Having spent your own considerable time for multiple property inspections, paid for a building and pest report and had your solicitor review the sale contract in full before turning up to register and bid - that was all to no avail ….. for many sadly they would be saying "yet again".
Let's Dig Into The Numbers
What if we ignored what the real estate agent was guiding buyers on price and did own own due diligence to work out what this might go for.
Looking back 10 years to research growth rates, Paddington houses have risen on average +6.4% p.a. You can access this information quickly and free of charge online.
On that basis, applying that growth would estimated the homes value today to be in excess of $4,650,000. How were they quoting $3.8m to begin with?
- RECENT COMPARABLE SALES
Recent Comparable Sales
Sold Dec 2020 | $4,075,000 | Narrower, older renovation, only 1 car parking
Sold Aug 2020 | $4,535,000 | Similar home and size
This is a just a quick glance to find these two examples, based on this alone, as an ex-agent, I would expect to pay +8-10% higher prices today, so $4.75-5m would be a far better estimate than $3.8-4m.
Of the currently 25 (units and houses) properties available to purchase, many of them are already under offer. Historically this is a very low level of choice for buyers, driving extreme price growth.
Days On Market
Sits at 39 days for all types of property in the suburb, however, this is a yearly data point, so would take into account the slower selling conditions during lockdown and Covid in general for much of 2020. The actual DOM currently would be vastly shorter - a reflection of the boom time sellers market. Note - this house was listed online for just 17 days.
Online Property Estimations
From extensive experience over 20+ years using sites like this, I can tell you, it’s rare they get it right.
As an agent, buyers would try to negotiate saying “Rpdata CoreLogic (or drop in here whichever website you use) says it’s only worth “X” and as an agent I would rubbish those sites … except when it suited my narrative and like this example below, we would refer to the incredibly low market estimates to guide buyers at a much lower price point to drive traffic and competition to the home.
374 Moore Park Road, Paddington - Today’s market estimates online, even though it openly sold on Saturday for $5.65m.
So this clearly demonstrates the need to do your own market research to determine value, the website data is often out of date and be vastly off the real value of a home.
Agents need to lift their game with underquoting rife across the country, especially in this rising market which is adding another level of difficulty for buyers at all price points.
Watching the media closely, there are a lot of stories of prices going crazy and always it’s the agent claiming that “it’s the buyers / market taking it well beyond what they thought was achievable” - this is mostly BS.
A good test of this is the fact that the vendor listens to market feedback, considers all pre-auction offers (should there be any made) before setting their reserve price, typically done the day prior or on auction day. In this instance, the vendor was +27.5% above the agents guide and that rings alarms bells for me and underquoting.
Like I said, I wasn’t a party to this mess, so I can’t tell what really happened, but having been in the agents seat for thousands of property deals, I have a fair sense of what may of transpired over the course of this auction campaign.
To avoid the agent game playing and BS, outsource your property negotiation to an ex-agent who left the dark side to help buyers like you land their dream property at the lowest possible price.