Perceived Value

Saturday was abuzz with buyers. Two new listings from our office saw over 40 groups inspect the first open. That’s a lot.

Like the weekend before, the median number at opens was 15-20 groups, which is higher than our long term average of around 10.

Our first auction for the year was highly competitive, with four bidders and a sale price seven percent above the reserve. A strong result by any measure.

Meanwhile, some of our properties had zero groups through.

So why would one property see 40 groups and another zero?

It all comes back to price, or more accurately, perceived value.

There’s an old adage in real estate: “Buyers shop on price and buy on emotion.”

It’s cheesy but true.

Buyers first shop online. They enter a broad price range (e.g. $2,000,000 – $3,000,000) across a handful of suburbs. They filter by property type (house and townhouse) using the icons for bedrooms (3+), bathrooms (2+) and car spaces (1+) and then sort by ‘newest first’.

Then they browse the pictures and floor plan, check the map for the exact location, maybe check out Street View to make sure it’s not next to a development site or power station.

Finally they make a call on whether it seems like good value and is worth inspecting.

So if you see a four bedroom, three bathroom, double garage fully renovated period home on a quiet Armadale street at $2,200,000 – $2,400,000, safe to say there will be a line wrapping around the block to inspect.

If it’s a two bed, one bath, no car unrenovated single front on Dandenong Road for $2,800,000 – $3,000,000, it’s unlikely anyone will inspect.

Once a buyer inspects, then they can make a more informed decision on value and whether it’s worth pursuing depending on how much they love the place, what they expect it to sell for, and whether that fits in with their budget for that particular home.

There are so many variables involved in how a buyer perceives or determines value, many of which are not based on logic but rather emotion (have they always wanted a white picket fence?) and motivation (how many properties have they bid on? When is their third baby due?) that it makes it impossible to accurately predict value.

So we can only use these inspection numbers as a guide.

If you get 50 groups through a property it probably means that the initial price guide was too conservative and it’s time to lift the range.

Conversely, if you get zero groups it could be time for a difficult conversation with your vendor that price needs to be addressed if they want to sell.

As agents we do our best to advise our clients on value and set price guides based on the best comparable sales, a bit of a ‘gut feel’, and also taking into account our vendors’ expectations.

Sometimes we get it wrong.

Too high and we jeopardise our vendors’ chance of selling. Too low and we risk wasting buyers time, or worse, misleading them.

Neither is a good outcome.

So we continue to play Goldilocks and try to get it just right. And if we do get it wrong, we admit it and adjust accordingly.

We have more great listings hitting the market this week and some off market opportunities that will become available soon.

Thanks for reading.

David.