Why pressure the seller on price and not the buyer?



Real Estate Agents are renowned for encouraging a seller to put a price on their property which is often unrealistic, not based on actual market conditions or true sales data and then slowly conditioning them over the first four weeks to “meet buyer expectations” They use special catch phrases like ‘the market is telling us’ which, simply put is very cute real estate agent speak for ‘you should have never believed my appraisal in the first place!’

Why is this so? Why pressure the seller to meet buyer price expectations and not pressure the buyer to meet seller expectations?

The answer is very simple, Open House Inspections attract a group of strangers’ unknown to the real estate agent, he or she has no knowledge of their financial situation or their motivation, on the other hand the agent usually knows a lot about the seller.

During the appraisal process the seller may have disclosed why they are selling, they may have mentioned certain financial pressures, or their plans to buy a new property and at what price point. This information gleaned during the agent pitch process, often allows the agent to get a clear idea of the sellers’ personal circumstances, timeline to sell and other motivating factors.

The agent does not have this level of information about the buyers, they have no idea what the buyers’ agenda, timeline or motivating factors are, so it is easier for the agent to work on the seller to get a result. The agent also has no idea how much the buyer can afford or will pay, so they don’t know by how much they may increase their offer.

This is one of the great conflicts of interest in the traditional real estate sales process, if the seller can be convinced to drop their price bingo! the agent has another sale and another commission, changes to the price have only small impacts on the total commission so agents have no reason to push the seller hard.

Take an example of a home that is on the market for $750k and the agent is charging a commission of 2.0% +GST or $16,500, if the agent can convince the seller to reduce the price by $48k to $702k (they usually do this by a wink & a nudge to the buyer saying, make sure your offer has a ‘7’ in front of it) their commission drops to $15,444 costing the agent only $1,056 but the seller has lost $48k and saved $1,056…this makes no sense at all. This $48k reduction in the sale price translates into the seller reducing their borrowing power for their next home by around $300k+ which will have a substantial impact on their next purchase. For the agent, it’s simply the difference between buying a new suit this week or not!!

It pays to choose your agent carefully and more importantly, do your own homework on pricing your property before you even talk to any agents. There is a wealth of information available to research which includes, recent sales and on-market data. For the very low cost of a Valuation you may save yourself a great deal of time and money as overpriced properties simply stay longer on market whilst the agent ‘conditions’ the seller!