If Your Agent Loves Property Investors… Run!!! Because, They’ll Be Tempted To Sell Your Home Quickly (For Less) To Their Investor Mates And Then They’ll Add It To Their Agency Rent Roll

This chapter is a warning to you to avoid listing with agencies that sell primarily to investors, and I’ve a really important point to make in the following pages; but firstly you’re probably asking, “How will you know which agencies sell mainly to investors in the first place?”

Well, one of the real warning signs is an agent suggesting that they have several buyers on their database.

But what’s wrong with that? Look a bit closer and you may discover the agency has a large rent roll and a correspondingly large investor database.

This warning may sound odd, but after you read this chapter, you’ll understand why.

Here’s the crux of the problem for you as a real estate seller – you want to sell for the highest price the market is prepared to pay, don’t you? On that basis, you’ll want a buyer who sees the greatest value in the property and is very much an emotional buyer.

Advertising and marketing experts the world over agree that it is the ‘emotional buyer’ who will pay the most for any product or service. No doubt you’ll appreciate this point. Just think back to a time that you got so excited about buying something that you just had to have it. Was this emotion driving your desire to purchase or was it cold, hard logic?

In real estate terms, the emotional buyer is virtually always the owner-occupier rather than an investor property buyer. You see, investors are precise and logical in their approach to buying property. This is what I mean…

•  *  Investors look at return.

•  *  Investors buy using stats.

•  *  Investors use their heads.

•  * Owner-occupiers tend to be more emotional.

•  * Owner-occupiers buy not caring about returns.

•  * Owner-occupiers use their heart not their head.

•  * Owner-occupiers are usually more motivated to make a quick decision.

For these reasons, their aim is to buy under market value. Investors generally don’t pay a premium price for real estate.

Owner-occupiers on the other hand, usually pay more than investors because; for starters they are buying to live in the property.

You simply want to target owner-occupiers because, as you know, the price we’re prepared to pay for anything becomes much less of an issue if we’re buying using our emotions.

Recently I appraised a unit in New Farm which is currently rented by another agency for $330 per week. There’s several months left to run on the lease. Considering the return and condition of the unit, an analytical investor would most likely only offer somewhere in the vicinity of $350,000 for this property because of the rent being achieved. An owner occupier on the other hand will certainly see value in this property at around the $400,000 mark (sales evidence in the CMA indicated a sale price of $400,000 was likely and $415,000 was possible based on recent sales history). Targeting the right buyer for this seller resulted in a premium price of $425,000 being paid.

Ok, so we now know that an owner-occupier will, generally speaking, pay premium prices and an investor won’t. So where’s the connection between this knowledge and steering clear of an agency with a large rent roll?

Allow me to illustrate something for you that’ll make it all clear.

Simply, if the agent’s primary strategy to sell your property is to promote it to their database; and if the agency has a large rent roll, it’s most likely their database will actually be made up of mostly landlords or in other words, investors. The outcome is obvious. No premium.

A word of warning: a real estate office with a large rent roll may be tempted to act purely out of self-interest and seek out investors to buy your property. This is because even though you might not achieve anywhere near the price your property could otherwise achieve, they’re happy because they’ll retain or gain yet another property to manage. It generates a lucrative long-term source of income for them.

The general Real Estate code of conduct which your agent should strictly adhere (better agents do), they must act in the sellers’ best interests. That means selling the property for the best possible price. And that means selling to a buyer who will value the property the most. That buyer is usually an owner-occupier.

Your agent should make a conscious decision to use advertising/photography etc to appeal to the owner-occupier buyer. This doesn’t mean they don’t sell to investors. But rather, constructing a promotional campaign that will also capture the attention of more emotive investors.

Simply put, you’ll have a much higher probability of selling your property for more when your property is targeted to owner- occupier buyers.

And that’s why you shouldn’t choose an agency that sells primarily to investors if you want to sell for a premium price.

The Key:

Choose an agency that targets buyers who are prepared to pay a premium for your property, and you’ll avoid this TRAP!