Alistair Helm calls for property price searching online to be more accurate

Alistair Helm calls for property price searching online to be more accurate

By Alistair Helm*

A recent appeal against the findings of the Complaints Assessment Committee before the Real Estate Agents Authority on the subject of online search pricing for property highlights a major issue which in my opinion should have been addressed long ago, as it continues to frustrate buyers as to price expectation of property on the market.

Here is the heart of the issue.

Well over 1 in 4 of all properties on the market today are advertised without a price, in Auckland that figure is closer to 1 in 2.

That means in Auckland there are 3,485 properties for sale with no detail in the listing as to any guidance of price expectation.

Buyers often comment that such properties are deliberately avoided as they hate the uncertainty and risk associated with discovering properties only to find it is way outside their budget due to the price search bracket on the website.

The decision not to display a price on a property is in the view of real estate agents due to the fact that in their words “the market will decide the price”.

That is entirely true, as the sale price has no bearing on any displayed price or indicative price.

The selling price is the agreed price based on the willing seller deciding to accept the offer of a capable buyer prepared to offer such a price.

However the market decides the selling price for all properties, not just those with no price indication.

This problem confounds buyers and is at the heart of this appeal to the REAA Complaints Assessment Committee. A property should only be displayed in search results on a website within the range which includes the assessed price. That is the price which the REAA requires every agent to complete and submit to the vendor when listing the house.

So if the agent assesses the house at $625,000 then the property should feature in a search range of $600,000 to $650,000. Not in a search range of $550,000 to $600,000 nor in a range of $650,000 to $700,000.

In my opinion one of the issues that results in properties appearing online within too wide a search price range is that real estate websites whether aggregator property portals or real estate company websites provide too wide a price range in the search filters and should refine their search process to reflect the needs of buyers, not play to the marketing tactics of the agents.

It should be required of such websites that increments of price ranges be more narrowly defined so that buyers can input their budget and expect to see properties displayed which based on an agents appraisal would likely sell within that range

Let's look at this case in point and through that see exactly how this situation arises within the industry’s approach to property marketing.

This particular appeal received publicity in the NZ Herald recently and concerned a Harcourts agent who listed a property in August 2012.

The property was appraised with a price range of between $880,000 and $980,000 with the vendor expressing a clear opinion that they wished to achieve a sale price of $980,000.

Now this is the first issue I have. The Real Estate Agents Act enforced through the REAA requirements of Agency Agreements for selling a property requires the following:

“A written market appraisal: This is the agent’s best estimate of the price they expect your property could be sold for, based on sales and prices for similar properties in your area or a similar area.”

The best estimate of the price - not a rough guide with a range of $100,000 amounting to more than a 10% variance. Reading the particulars of this case clearly the agent chose to provide a range that happened to stretch from the agents best estimate of $880,000 to the vendors expectation of $980,000 - a clear disconnect which would be bound to lead to issues between agent and vendor.

The property was listed with an auction method of sale with no price displayed on the web. The listing had a search range of $750,000 to $950,000. 

Here is the second major issue - the agent provided a market appraisal of $880,000 to $980,000. Why then did the agent list the property on the web with a search price of $130,000 below their appraisal and $230,000 below the vendors expectation?!

The reason is to be found in the evidence to the REAA enquiry provided by the licensee who stated in the submission that:

“It is industry practice to load a property within a certain price bracket. Generally, this price bracket is quite wide, in the vicinity of $200,000, as this allows person searching for a property within that region to view properties that are above their price search criteria and associated properties below their price search criteria. This is useful to the vendor as it allows a wider range of parties to view their home and can often generate interest in different price brackets from parties who originally had a lower or higher price that they wished to spend.”

The licensee went on to state:

“Price search criteria are not the price of the property and they have no bearing on the final value - their use is purely to assist prospective purchasers who might use price search criteria to assist in narrowing their search results. I also make the point that only a small sample of buyers indeed search for property using price search criteria. Rather my experience would suggest they are more intent on searching for property based on key criteria of suburb and amenities such as bedrooms.”

This assertion by a real estate professional is frankly staggering and I would have thought that the REAA would challenge this view that a $200,000 range is acceptable, and to state that the intent is to generate interest fromm parties where the property is outside their intended spend.

To then go on to state that buyers don’t use the filter criteria on websites is hardly credible.

All the main real estate portals and leading real estate company website have price ranges of $100,000 between $500,000 and $1m, below $500,000 some operate with increments of $50,000 and over $1m the increment rises to 200,000. 

In my view it would be of great benefit to all buyers to have the listing price search in increments of $50,000 right up to $1m. Leaving the user to refine tightly their budget criteria to within $50,000 or to widen it to $100,000 or more.

Additionally properties should be loaded on such sites with a single price which whilst not displayed, should accurately reflect the market appraisal presented by the agent.

In this way the buyer would get to see properties that meet their budget as opposed to being shown properties that the agent judges that they should be enticed into viewing and end up being sold  for far more than their budget or the price search criteria.

As in this case where this property would have been seen by prospective purchasers who may have been searching for property between $700,000 and $800,000 due to the search range of $750,000 to $950,000 when in fact the vendor was not prepared to entertain any offer less than their view of the value at $980,000 shown by the fact that the property passed in at auction at $880,000 and a subsequent offer of close to $900,00 failed to secure a sale.

---------------------------------------------------------------------------------------

The above article was written by Alistair Helm, and is republished with his approval. The article was originally published on Properazzi here

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

9 Comments

Comment Filter

Highlight new comments in the last hr(s).

Alistair
What a fantastic Article
Great to read an Article that has buyer interest in mind. Maybe your next article could be on vendor biding this is a disgrace to the real estate industry.
Love the look of your website www.properazzi.co.nz look forward to following you on here.

Very interesting - say you search houses up to $500,000 on the TradeMe website. You see one you want advertised for auction. You spend money on a LIM, a builders report, get your finance pre-approved and take the time off work to attend the auction.
 
You are the only bidder at the auction and you bid the $500,000.
 
The property is passed in.
 
I quite agree that you should at least have all the costs you incurred in preparing to buy the house reimbursed by the REA..
 
No problem if there were other bidders and the house went above the $500,000 mark and you lost - you couldn't expect reimbusement of your costs. But if you're the only bidder, I'd say that you should expect to walk away from the auction having purchased the house. If not, then the advertising was misleading and the agent should pay for your costs.

The transcript of the REAA Complaints Assessment Committee is an interesting read
 
The RE wanted a marketing fee of $3950
 
For that, they would list the property including photos on all appropriate electronic media
 
For an extra $400 they would provide "superior" photos

Got sucked into exactly the Auction scenario as explained above.
$900 down the toilet.  All because the salesperson would not be up front about the vendors expectations.
The worst part of buying a house is having to deal wih RE agents.

If the advertising was misleading in terms of the price range searched and things went as I described above, you should invoice the RE agent for your costs (include copies of the invoices for the expenses you incurred and write an explanatory cover letter about what website you searched and what price range the property came up under - copy the owner of the agency on your letter to the agent).
If the agent refuses to pay, then you should take the RE agent to the Disputes Tribunal.  They may claim not to have jurisdication (in which case I believe they refund your application fee - but you might want to check that) however, if they heard it, I doubt you'd lose the case.
 
 

If these agents have to appraise houses when they list them, why don't they just tell us buyers what their appraisal was? Whether the sale is by auction or otherwise?  
I'm not interested in market feedback or bait price guides, just tell me the truth and save my time, your time and let me buy the house or move on to a property that was appraised to sell within my budget.  It ain't rocket science!

Wholeheartedly agree with Alistair. I found deceptive searching to be disheartening as a first home buyer. I would search for properties <$500k and the search results are full of properties $600k+.
 

  • The properties with prices are easily filtered - simply "sort by price" and then skip a few pages.
  • The "price by negotiation" and auction properties required a QV check to see whether I'm even in the ballpark. In 90% of the cases I wasn't even close. Thankfully Westpac offers unlimited free QV checks.

Not just search listings. RE's used to put houses under our noses "comfortably" above the limit we had told them.  Result, sometimes I took a bit of time off and watsed petrol or my weekend time to see something only to find it was unaffordable.  More than once I got forms for an agreement and the vendors expectations were way higher than my one  "oh just meet them half way" no we walked away.
So really what has changed? by the look of it nothing.  Most RE's still seem dodgy and border line dishonest, I pity a FHB who hasnt "clicked" on this behaviour.
regards
 
 

Well well ya dont say........
"This is useful to the vendor as it allows a wider range of parties to view their home and can often generate interest in different price brackets from parties who originally had a lower or higher price that they wished to spend.”
 
Another alternative would be ......if I want to search in a higher or lower bracket I will um..........
search in a higher or lower bracket!