for sale by owner in Northern Virginia and DC

FSBOs: Anyone can pick up at an orgy.

As the property market plateaus, and there are no more booming suburbs to boast about, the property broadsheet has turned its focus on the changing face of real estate. Specifically, I refer everyone to Su-Lin Tan’s article in the Australian Financial Review titled (somewhat dramatically) ‘Digital Disruption comes to the Property Market’. The AFR have heralded back the private seller by the power of the internet.

The AFR identifies a couple in Taren Point. That couple, during the boom, were able to sell their property at ‘well above’ their reserve. The couple, who had listed the property on the website ‘Buy My Property’, had employed their own auctioneer and undertaken their own open houses.

The article goes on to say that consumers don’t need real estate agents. Among other accusations, it is intimated that the total value of an agent is their spurious database, indicating that all real estate agents do is focus on sites like domain.com and realestate.com.

On this basis, the AFR would indicate that the growth of the internet in terms of selling houses will reflect other parts of the world. Part of this may be right, however there is a considerable amount of journalistic licence which has gone into this article.

The article does not tell us what the reserve price was. More importantly, how was the reserve price set? If the Reserve price is set too low for the market, of course they will sell over reserve. Unless trained, vendors are unlikely to have the capacity to properly appraise a property. The Australian Property Institute asserts that takes the completion of a three year course to evaluate land. This is over the top, but many agents have been unable to determine the estimated selling price for a property, and these people are trained.

What is most poignant is the lack of research which has gone into this article. What people are forgetting is that we have come out of a boom. Quite frankly, your dog could have sold their property over reserve. Any property presenting in a boom should and will sell at a price which exceeds all estimations. That is the essence of a growing market. It grows from week to week without any efforts from those within the marketplace.

In every boom we have seen the advent of DIY sales systems. In the last boom we had a range of FSBOs including ‘Home Open’. I remember reading articles that this heralded the end of agents during the last industry cycle. Where are they today? FSBOs and Home open have disappeared with all the others. Once the market plateaued, and expertise was required to sell a home, the DIY companies disappeared.

During Leverage’s research, we discovered one of the inventors of the DIY systems. Ironically, he used a real estate agent to sell his property.

There are far too many critics of the real estate industry. Incidentally, many of these critics use the services of real estate agents. Even the great Neil Jenman, who widely criticized auctions, utilized the auction system to sell his property.

As the property market plateaus, real estate agents will become increasingly important for vendors, in order to ascertain the estimated selling price and to understand how the market is operating. Moreover, as buyer’s leave the market and it becomes a buyer’s market, the work that vendors do with their database becomes much more important. This year is only a plateau. Wait for next year when the market is slow and purchasers are hard to come by. This is when real estate skills will come to the fore. The empirical evidence we have is that the best real estate agents do best in slow markets rather than booming markets.

This is a beer and coffee sport. Who you choose to drink with are likely vendors and purchasers which will determine how well you will go in this industry. The ability you have to maintain a database, for both who to sell to, and for, is absolutely imperative for success to both real estate agents and those involved in the industry. This has been the case for well over 100 years, and we don’t expect the internet will change what makes a real estate agent successful.

Nevertheless, it is frightening that realestate.com and domain.com have been funded by the real estate industry. Let’s hope that they do not turn on the industry and become the next FSBOs. They have data which, matched with a sales force, could seriously affect the industry.

Leverage has indicated the changing face of real estate on a number of occasions. We do not see the impersonalisation of the industry as a successful path for either vendors or purchasers. Property works in historical cycles and the evidence shows that DIY property sales systems don’t work in any but a booming market. Houses are highly personal, and require a personal touch. While other parts of the world have grown in internet sales, sales in Australia have never reflected the same trends. It is probably our high level of personal home ownership rather than investment, which has caused us to differ from the world. The investment market may operate well in the internet space however residential homes will always require personal and physical involvement.

It is fine to speak about success stories during booms, but just remember; anyone can pick up at an orgy!