Can an agent achieve a higher price than a private sale?

Alistair Helm

This is an age-old question and one that will generate opposing responses based on the perspective of the responder. A few moments spent on the Trade Me forum category of real estate would have you believing that private sales were a viable option and, given the projected saving of many tens of thousands of dollars in commission thereby seeing the seller better off than by using an agent; although they would be hard pushed to say that they achieved a higher selling price than an agent.

Conversely, a conversation with an agent would generate a response reflective of the competitive tension that an agent can generate between competing buyers such that the agent will secure the best price, which would be the highest price attainable in the market (the latter caveat being very important).

For like it or not, the fact is that there is no evidential way to prove that an agent can secure a higher price than a private seller. The fact is that the price attained for a property is governed by a unique set of circumstances that can never be replicated. There is no such thing as a ‘control’ in real estate.

What I mean by this is that in the scientific faculty everything is evinced by a Control by which any experiment is measured. Testing of drugs, improvements in battery technology, new microchip technology all of which are assessed by a control that allows scientists to say that this version B is x% better than version A.

In real estate this is not possible. No two houses are identical; for whilet they may be two identical apartments or two townhouses or even two three-bedroom family homes in the same street, each will be different as a function of their orientation, conditions or layout. Mix into this the very unique circumstance of the buyer pool that is so small for any property and you begin to realise that every transaction is a unique set of circumstances that occur at a point in time and can never be replicated.

Think for a moment about the sale of a particular property. Could it achieve the same sale price a week later? In theory, yes, but the probability is that it would not, as the price that was achieved was a function of the buyer pool at that moment in time, a day later, a week later and one or more of those buyers might have exited the market having bought another another house and equally a new buyer or set of buyers might have appeared as they suddenly became ready to make a purchase decision.

So, unlike the ability to set up an experiment to test price sensitivity for a consumer product in two supermarkets in different areas of the country to test demand, the property market does not afford such controls. It is therefore impossible for anyone to say that they could achieve a higher price than anyone else. The price achieved for the sale of a property is a function entirely of two aspects of the property selling process.

Maximum exposure

The ability to achieve maximum exposure of the property for sale within the buyer pool is critical to engage and motivate prospective buyers to review the property. Any lost opportunity in this area is potentially the most damaging to the sale process and impacts the sale and the sale price. Exposure is not simply being on the web, it also goes to the presentation of content, with particular focus on the images of the property and how they are laid out.

Competitive tension

The ability to motivate the prospective buyer pool to actively compete to challenge one another to buy the property is key to a successful sale price. This does not assume that the only method of creating competitive tension is an auction although this can be an effective public tool to create emotional tension. A standard well-facilitated negotiation between active buyers is just as likely to achieve a favourable result as would a tender. The key to creating competitive tension is the facilitation process. which is in someways the greatest skill and attribute of a professional real estate sales person – the ability to maintain buyer interest and bring buyers literally to the table to make an offer and to be motivated to stretch to challenge competing offers, so that the final offer meets or exceeds the expectation of the seller.

There is no doubt that the component of the property selling process comprising creating maximum exposure has in many ways been taken out of the hands of the real estate agent as the online medium is the aggregation of this exposure through sites like Trade Me Property and Realesatate. However, to fully optimise the potential to achieve the best result for the seller, the role of the agent is hard to ignore or dismiss as it would take a unique set of skills for a private seller to replicate this capability.

Former Realestate.co.nz CEO Alistair Helm is founder of Properazzi.

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