Are you wondering why so many houses don’t have an asking price?
This is always a debatable issue but it’s one I feel needs to be explained further for the benefit of anyone looking at buying in this market. Please let us know your thoughts by commenting below, we would love to hear from you.
I have the following conversation at least 10 – 20 times every Sunday during our open homes…
Buyer: “How much do the owners want?”
Me: “Here are some recent comparable sales. The main thing for the owners is that they get it sold as they are moving to ‘xyz’. They are open to all offers.”
Buyer: “But you must have some idea what they want? Just give us an idea.”
Me: “Any number I give you could be misleading as we really don’t know what it’s going to sell for. Give you a number too high and I might put you off. Give you a number too low and I might cost you the house (or cost the owner money).”
We realise this is extremely frustrating for buyers to hear as it forces you to decide where you see value for the property and you don’t want to get it wrong. The flip side of the coin is that it is extremely dangerous for owners to put a price on their property in this market. Pitch it too low and they undersell their biggest asset. Pitch it too high and their open homes may be ghost towns as every buyer seems to be able to smell an overpriced listing from a mile away.
“I just want to negotiate! Tell me how much the owners want!”
As Kiwi’s, we are natural negotiators. “Let’s meet in the middle and call it a deal” has been our catch-phrase for generations, searching for this mythical middle ground where everyone negotiates a little bit and ideally walks away happy. Anything else is considered one-sided or unfair.
Unfortunately now, gone are the days of most properties being marketed with a simple asking price (especially in the main centres). Why you might ask? Well, it simply comes down to demand and marketing. More buyers in the market than there are houses for sale results in more competition for each property, especially the good ones.
Real estate salespeople are hired by owners to secure a sale and the ones who take it seriously don’t just want to sell the property, they want to do everything they can to help those owners secure a great result. That’s where Auctions, Tenders and other processes come in. They provide an environment where all interested buyers can participate and compete to buy the property, providing the owners with a more accurate picture of the market, and the potential to secure a price above their expectations if available.
Different buyers will pay very different prices for the same property depending on their needs and motivation, so while owners may alienate some buyers if they don’t sell with a set asking price, they also allow buyers the opportunity to decide value, which may work in their favour. The potential benefits well outweigh the risk of upsetting a few people by not advertising an asking price.
Note: A large factor in the incredible property price growth seen in Auckland of late must come down to the use of Auctions in marketing real estate, with buyers getting carried away trying to secure sought after houses, fearful of missing out for the umpteenth time. Each premium sale price sets a new benchmark in the market, increasing the expectations of the next wave of owners who put their properties up for sale. I firmly believe if all properties in Auckland were sold with a set asking price, then property values would not be rising as fast and as quickly as they are.
So, should Tenders / Auctions be banned?
I don’t think so. Houses are not a commodity. You are not buying a can of baked beans or a bottle of milk here. As mentioned above, houses are worth different amounts to different people and some will pay more for the same house than others.
Shouldn’t owners have the right to try and sell their home for as much as they can?
If you have renovated a home, paid the mortgage for years and put your heart and soul into it, wouldn’t you want the opportunity to test the market and get the best possible price when you finally take the leap and sell?
At the risk of stating the obvious, the issue comes back to the shortage of supply, but it’s not just a case of building more new houses, although that helps. I believe there is a bigger problem than Auctions & Tenders facing home buyers right now and I wrote about this a few months ago. Click here to read the post.
If you are buying via Auction or Tender it’s important that you back up any emotional buying decision with logic, and don’t get carried away in the heat of the moment. Make sure you read: 6 tips to help you decide on a price.
Have you missed out on a home recently? Don’t make the rookie mistake of “buying on the rebound”. Read more here.
Not keen on competing with everyone else? Check out: 5 ways to find houses with less competition.
At the end of the day it’s important to remember – I can probably find you a home which no one else wants, but would you want to buy it anyway?
As always, stay safe out there and mark smart property decisions people!