Buyers negotiation rights are being removed, forcing sale prices well above what should have been paid

This is no doubt going to ruffle some feathers as Linkedin is full of Real Estate Agents and beyond that, I have a lot of connections outside of Linkedin that will ultimately read this as I share this through other social media channels.

Let me start by saying, I know not ALL agents are doing this ... but in my recent search for a new property, I am 2 for 2 on bidding on properties where I have been put in this "Technique" of an Agent dealing with Buyers on property transactions.

Before I share my experiences, this is how I understand how residential property is sold, as it has been my experience multiple times in the past.

One is by private treaty, where a property is listed for sale through an agency with a set price or a price range. Prospective buyers then inspect and place an offer if they are interested which an agent will present to the vendor within 24hours, and its either rejected and usually a counteroffer made or it was accepted and a sale transaction happens.

The other way was by auction, where a price range is indicated with a set date and location where interested parties will attend and make bids for the property against each other with the highest bidder getting the property if it makes it past the vendor's reserve price.

What seems to be happening now is something between Private Treaty and Auction ... but unlike Private Treaty you don't have any opportunity to negotiate and unlike an Auction, you don't get to see the bids of other buyers you are up against.

All you get to do is submit a one-off best and final offer for the property, no negotiation, if you lose you are out ... and in both instances I have seen, the winner buyer is paying over way over the second-highest bidder ... which Agents are defending saying "that's what they were willing to pay" but no buyer will be happy to find out that they were $58,000 over the next closest bid (read on for that bombshell) and it wouldn't happen in any other sales method except this one they are adopting.

In short ... Home Buyers are being screwed and sadly I don't know as a buyer how to avoid it. I used to loathe Auctions ... know I crave seeing a property I like being listed as up for auction.

Ok time to give you all some real-life examples ... all have happened in recent weeks, the last one happened just yesterday.

Example One - East Bateau Bay

Property was listed Private Treaty with a price guide of $800k. As usual the price guide was a little low for what the property was worth, but within the legal 10% as everyone thought $850-$900k would be where the property would sell.

The suburb is popular and the price guide had a bunch of people head to the open home which looked way busier due to COVID-19 restrictions, but it was busy none the less.

Not long after the open we received a call from the agent and told that due to the numbers at the first open that they were going to present best and final offers to the vendor at lunchtime Monday so if we were interested we should put our best offer in before then … just two days after seeing the property for the first time.

We put in a solid offer of $875k with good terms on the Sunday evening and on the Monday we got a call from the agent letting us know that we didn’t get the property but we were the second-highest bid to a “substantially higher” bid. The winning bid was so much higher than ours that the agent wanted to keep us interested as he felt the first bid might fall through …. anyways, it didn’t fall through and a Sydney buyer had his offer accepted for $933k … so a whole $58k higher than our next highest bid.

Example 2 - Long Jetty

This one an agent we knew who misses out on the listing gave us an early heads up, we liked the area and the vendor's expectation was high 6’s / low 7’s which was in line with what was selling in the area.

Again we made it to the first Open, which was on a Friday lunchtime and that night we sent the agent an offer of $730k, all cash, no contingencies which was strong on all fronts and in was in super early.

The agent took the offer but mentioned they were still going to run the planned Saturday open house which was understandable. After chasing the agent up Saturday evening I got a message that she was meeting the vendor Sunday to present the offer … which we thought was weird but what else could we do? … After an anxious wait Sunday we got another message Sunday evening that she didn’t get a chance to meet vendor today, but it will be tomorrow.

Smelling a rat and knowing that my offer should have been presented within 24 hours but we were at 48+ and nothing. I called to see what was going on and then I got the latest spiel ... "the vendor thinks the fairest thing to do is for everyone to give a best and final before 3 pm tomorrow and from that they make their decision.

So once again we have all negotiation rights removed and are bidding blind ... so we up our initial offer to the highest level we can and resubmit. Apparently 6 offers were submitted and below is what I got from the agent.

It will be a little while before I find out what the winning bid was and discover just how much "well above the other bids" is ... but one thing I know is that the winner bidders excitement to secure the property will be shortlived when they discover their offer was "well above" what it needed to be to get it.

The worst part is, buyers now have a new ridiculously high comparable sale to compete against on the next property they see in the area and try to buy. But I can't see this trend stopping anytime soon ... Agents won't stop they are working way less and making more. Vendors won't stop it as they are getting stupid prices for their property in record time without the stress of multiple open homes or the cost of an auction campaign.

So for the foreseeable future my fellow real estate buyers ... we are all screwed!!

But safe money is betting on Real Estate Agents making the "Most Hated Profession List" ... AGAIN!! (Much love to all my Real Estate Agent friends)