Buyers agent Meighan Hetherington takes an interesting look at the pros and cons of how technology has changed how agents, buyers and property sellers work and why too much information can be just as dangerous as too little.
Meighan: It does. And I think the other things that an agent will really bring to the table – and particularly a buyer’s agent – is to look a little deeper than what’s on the screen, and that’s looking at is there overland flow that might affect the value of the property. Is it right next-door to an Energex transformer? All of these things will have an impact on the property. Is there a view? Could that view by impeded? All of these you cannot put into an algorithm unless that information has been input by somebody and it’s used within the algorithm.
Kevin: Yes. Quite often someone will call an agent to come out to do – well, they think they’re doing a valuation; they’re doing an appraisal, the possibility of listing their property, mainly because they want to know what it’s currently worth.
But to think that an agent can walk in with five minutes’ notice and come up with some kind of a reliable valuation of property, it’s simply not going to happen. Valuers who train for years have to come out and they’ll spend at least an hour and a half looking at the property, making notes about it, and then they’ll do their research, a lot of which is ringing agents but looking up on some of these portals, as well.
Meighan: You have to be realistic with what it is that an agent is providing. An agent is giving you an indication of what the average buyer in the current market, who’s not under duress to purchase, would pay for a property. So a market appraisal, if you like, is what a willing seller would sell for if they’re not under duress and a willing buyer would be prepared to pay not under duress. What I mean by duress is if there’s a financial imperative for them to do something in a short timeframe.
An agent is using their experience of talking to so many different buyers, taking buyers through different properties, listening to the objections that buyers have about certain things about properties – whether that might be room size or layout or aspect or orientation – and bringing all of that information together in their knowledge base – their head – and saying, “Well, here’s where I see the things that people will like. Here’s where I see the things that people might have a problem with. Based on that and the other comparable sales, I think it’s sort of in this range.”
But to ask an agent to walk into a property and in 10 minutes give you an idea of what it’s worth, they have a bit of work to do after they see a property to be able to give that range.
Kevin: It’s the hardest thing for an agent to do. I always went into it with a great amount of trepidation when I had to go and do an appraisal or a presentation of any kind. Once you get to the conversation about the price, it’s always difficult and that’s why many agents are actually accused of buying the listing, in other words, over-inflating the value. Because there are two things I do know, and that is that every seller wants more than their house is worth and every buyer wants to pay less than what it’s worth. So you’re always going to have that bit of a gap.
Meighan: There’s a fabulous cartoon about that, isn’t there? Where the owner thinks their property is a mansion, the buyer thinks their property is a tent, and then the bank is there as well.
Kevin: And then the agent is sitting in the middle wringing his hands and wondering what the hell this is all about.
I did a search on a friend’s property recently on one of these portals. I know what he wanted for it, and according to the valuation, it was something like a million dollars out.
Meighan: Less than half by the look of it. Yes.
Kevin: It’s actually worth, I think, what he wants for it because of the amount of work that he’s done it, but it’s lumped in with all the others in the area where the median is so low. I doubt that he’ll get it, simply because he’s probably over-capitalized, but it’s worth every bit of what he wants, but he’s just not going to get it.
Meighan: Well, it’s worth what the buyer is prepared to pay at the end of the day, and if there’s not a buyer that sees the same value in it as he sees, then that is market value.
Kevin: These conversations that you have with agents about valuations, what’s your opening gambit to an agent where you have a client who wants to buy this particular property but you know that it’s overpriced but they really want to pay for it? How do you talk to the agent?
Meighan: I talk about comparable sales. It’s very important that I have a discussion with an agent around what has sold, where the comparables were superior and inferior, and then bring back to that agent the information that I would like them to have a discussion with the owner about.
Agents don’t often set the price of properties; it’s often the owners that set the price, and the agent’s job then is to bring the market feedback. The agent can give them advice, but it’s the owner’s property and it’s their prerogative. They can put whatever price they want.
I have always said my whole real estate career, asking price is irrelevant. What we want to know is what are the comparable sales? How does the property that we’re interested in buying compare to those comparable sales? And how can I, as a buyer’s agent, represent my buyer in the best way to get the lowest price that I can using that information?
Kevin: As always, Meighan, great talking to you. Thanks for your time.