National Auction Round Table Part 3: Crucial Conversations

TRANSCRIPT

Steve Carroll: What I’m hearing from the table is there’s never been a time where the need to actually have a conversation, agent to seller, to say, “This is what you need to do. This is the value of your property. This is the strategies you should play.” We all know that agents generally don’t like to have those difficult conversations so, again, assuming the agents are going to be listening, watching this conversation. What advice would you give, Matt, to agents about tough conversation in 2018?

Matthew Scafidi: I think a number of people have mentioned that in the past five years, it’s been a pretty good market, and you can be an agent and you could get an auctioneer in and the auctioneer do their job and get the property sold. In our business, we have a pre-campaign meeting, a midway meeting and a pre-auction meeting. And sometimes that midway meeting, I’ve witnessed as being a bit fluffy. And it’s sort of hugging the vendor and perhaps second vendoring at times, where it should be an opportunity to be able to be prepared, firstly, by the agent. The agent needs to be prepared and have had the conversations with the buyers. And someone mentioned that earlier, that they’re not having conversations with buyers. Buyers sit there and say, “No I’m not interested in that property.” So then I go to the next question and say, “Okay, but if you were, where do you see value? You’ve been in the marketplace for six months now, so I can give some feedback to my owners.”
“Well, you’re saying 880, I see it at 780,” or whatever it may be. And they should be giving that feedback in their written reports to the vendors, letting them know they’ve withdrawn but this is where they saw value in your property.

So then when you do have that meeting, you can sit down and give them that feedback, of what buyers are saying price wise. But also, and I’m sure everyone in the room has witnessed it, where an agent would have no idea where the reserve price is going to sit until the pre-auction meeting.

Andy Reid: Or 20 minutes before.

Matthew Scafidi: Or 20 minutes before those meetings, where they say, “Aw we’ll give it to you tomorrow.” “No, you won’t. I’m the auctioneer. I won’t be conducting the auction if I don’t have a reserve here at the pre-auction meeting. The agenda was sent to you, and it was very clearly stated, this is what we need tonight.”
So they need to be having that discussion midway, and say, “the auction, Steve, was tomorrow, where would your reserve be sitting based on the feedback we’ve given you?” But they’ve got to have that feedback [00:02:00] to be able to give them an answer. And that’s what’s not happening at the moment.

Steve Carroll: Why do you think there’s a lack of, and you use the word James, accountability to have that tough conversation? I mean the industry seems to have a lot of that going on.

James Keenan: I think the process and the education process has to start from the minute you sign the property up. And it’s a process. If you walk in to your vendor two weeks into the campaign and start trying to tell them their house is worth 15 per cent less than what they thought it was worth three weeks before, and you expect to get a good reaction, right? Then you’re not a real estate agent.

It’s very easy to get the message across in the right way, but you have to do it over a consistent timeframe from the minute you start the campaign. And that means sitting down and talking to them, that means providing emails every day. That’s an email every morning at 5:30, a quick email telling them what’s gonna happen today, what’s happened in the last 24 hours. Because the one thing vendors want is communication.

And quite often a vendor will feel really good after you’ve had a hard conversation with them because they actually feel they know what’s going on. As a vendor, there’s nothing worse than going to bed at night not knowing what is happening. And agents think they’re doing the right thing by not having honest conversations with them, because they’re protecting them. But actually in the long run, they’re doing them a lot more harm and they’re not helping them.

I’ll finish with this, the worst thing you can have happen at the end of a campaign is going in to an auction room and have no bid. That is the worst thing that can happen right? Or have no offers, because at the end of the day, the vendor’s gonna turn around and say “I haven’t even had an offer.” You know?

Gavin Croft: I support that completely. You know that’s the one thing I’ve probably started to see with a few of the really good quality agents, is that touch point, like you talked about. In the morning, “Hey this is what we’re gonna do today.”
Check in point at the end of the day, ‘This is what’s unfolded.’
And it’s daily, so it’s two touch points. It’s almost becoming now a social media outlet, “Hey Mr. Vendor, this has just hit the market. Hey this just sold overnight, just wanted to keep you up to date. Hey we’ve got three new properties that came on overnight on realestate.com.au.”Good plug.

So that communication, but the consistency of it day and night, that’s important. And again you’re representing someone’s biggest asset. I think the quality of the information that we send through has to be real. I’m not against feedback, but sometimes I think agents have to be a little bit careful of, is this person gonna buy this house, and how important or how relevant is the information, if they think it’s worth 800, but they’re never gonna buy the house or they’re not even a buyer for it.

Matthew Scafidi: You have to have a relationship with that buyer to begin with. You can’t just have the first person you’ve met for the first time and get their feedback. You’ve got to say, “This person’s looked at X, Y, Z with us and this is the feedback they’ve given overall.”

Gavin Croft: It puts context behind the behaviour of the buyer, in support of the feedback, because that gives you the strength. They’re not going to buy the property, but they think it’s worth 800. Well that does not help me with my biggest asset.

James Keenan: Two weeks ago, our number one agent at Ray White, Gavin Rubinstein, put up eight properties in one night, and he sold all of them. It was no fluke he sold all those properties. It was hard work from the minute he signed every property, and it was hard work to the end, but he had buyers on every property, he had the vendors at the right level, and every vendor, bar none, was happy, delighted, with the outcome and it was all through the process.

Steve Carroll: Karl, can I ask you a question? Obviously we talked about negative equity, they must be the toughest conversations?

Karl Secondis: Well it’s almost the first question that I ask. Literally. My first question that I ask from people that ring up and say, “Can you give me a ballpark figure on what the property’s worth?” Pretty soon after that, I’m asking them what their payout figure is.
“I’m not sure.” It’s like, well you probably want to find out real quick. It’s kind of like, almost feels like a car deal, because that’s typically what you get asked when you walk into a car dealership, all right?

I’ve had to cut deals with people where we’ve had a side agreement saying, well, we might be able to scrape enough money to pay the bank out but we’re going to have to take a personal loan after we settle the deal, so the bank needs to release the title, settle the property, get a personal loan to pay your fee. Because normally we take our fee out of the commission. Or they’ve got to re-finance and take equity out of another property to pay the shortfall. Having those, like Tom Panos says, critical conversations upfront is like, “Well we’re sixty grand short on this one, we’ve got to take sixty grand of equity out of that, tip it into this so we can maybe get out of it.” It’s tough love, straight up.

My glass is always half full but I sound like it’s half empty on that phone call. I don’t make money telling you not to sell your property, but if you’re going to sell you’re going to have to grab the bull by the horns, rip the band aid off quick, because there’s no point fluffing around.

Gavin Croft: But that’s the reality of market here, isn’t it.

Karl Secondis: Absolutely.

Steve Carroll: And in some places in Queensland, as well.

James Bell: Yes, certainly, very similar to that Gladstone, Mackay, where the rent went through the roof, dropped back down.Very, very similar.

Steve Carroll: And what about the ACT?

Alec Brown: We’re still quite positive but I think the important thing is, the hardest part about selling a home is accepting the offer, whether it’s good or bad. It’s giving that offer context. I think one of the shortcomings that I sometimes see is the agent not priming the sellers for what’s actually going to unfold during the auction.

Predicting it in advance, “Okay, this is how many registered bidders we’re expecting to have.” You can’t, with a crystal ball, identify exactly how many, but if you say, “Oh look we’re likely to have six registered bidders,” and then on Saturday only one turns up, your credibility as an agent, and then to give them the advice to accept an offer, really does diminish.

So I think just being upfront with your communication and having those tough conversations. “Well, look, Saturday’s not looking as positive as we would have thought two weeks ago, we’re predicting these two bidders are going to be participating but at this stage they’re only talking X, which is still a little bit short on what you want.”

I guess though, when it does happen, “Look, this is exactly what we talked about at the vendor meeting, we have fallen that little bit short, what do you want to do now?” They’re in a better space to make those big decisions. Because two minutes in the home mid-auction feels like two seconds for them, if they’re not going into that prepared for every single outcome, you can’t expect a seller to make a rational decision.

Stuart Benson: And a good agent should know. I’m sure Gavin went into that night knowing at a high percentage that eight from eight were going. He does the background work, his owners are where they need to be, his buyers are where they need to be.

James Keenan: I think what’s really important, pre auction, is you sit down with your vendors and you role play the three different scenarios that can play out. So they have an understanding what’s going to happen to them, all right?

Because when you’re under pressure, it’s a whole different story to then having a casual conversation. So, well this is the best outcome, this is easy, if this transpires, happy days. This could happen. And then, worst case scenario, this could happen. So at least your vendors are prepped for what’s going to happen tomorrow, and you’ve roleplayed all the situations.

Gavin Croft: To your point, that’s a really important one, I reckon. Because that pre-meeting, let’s say you’ve got three bidders you’re expecting and you get one, you’re in big trouble. They’re on a rollercoaster just sitting there, they’re brain’s just fried with what’s going to happen, and if you tell them three and one turns up, think about how they feel. You’ve just put yourself on the back foot.

And you were talking about then, James, is going through “here’s what can happen”. So we’re going to have a couple of different scenarios tomorrow. You can never guarantee it. I remember once I was going to bid at an auction and my daughter got sick and I wanted to go and buy the property but my daughter was sick and we didn’t go to the auction.

So for all intents and purposes, I was a bidder, I was a buyer, but there’s some things that are out of your control. I think it’s important that they understand that, whilst, here’s what we understand and here’s what the landscape looks like, I don’t have full control. I can’t drive them to the auction, but here’s what we know, and this is what we don’t know, and they’ve just go to be really comfortable around that, because there is some unknown with it sometimes.

You generally feel that this is what’s going to unfold and this is what’s going to happen, but it doesn’t always work out that way. [00:11:00] Which is some of the allure of the auction.

Will Hampson: You can’t control the market. The agents can’t control the market, the auctioneers can’t control the market, but you can control your activities. That vendor management, as Karl touched on and James spoke about, upping the vendor management and having the conversations and building trust with your vendors, so that they head into that auction, and through the process, that they’re able to meet the market, and they’re able to make a clear decision, particularly, like we sell for a lot of prestige clients, they’re selling three, four million dollar properties. The vendor management’s got to be critical because they’re making a decision that could be two, three hundred thousand dollars in the difference between their next move.

For most of those sellers and those clients that Gavin would have had, selling eight properties, prestige, eastern suburbs properties, he’s got to build implicit trust with those vendors to make a decision when you’re selling a multi million dollar property, so that they make a decision on the day and they know that it’s the best decision.

Karl Secondis: Can I just say there, though, that prestige, high end client, that $300,000 is no different to a $30,000 difference for your average seller?

What I was going to say, just adding on to what Gavin was saying a minute ago, is I think the agents are very eager to talk up a story to a vendor, and I think if you can under promise and over deliver. If you think you’re going to get three bidders, and you get four bidders, you might be talking about three with the possibility of a fourth and then you can deliver four, then you look solid on the day, as opposed to talking up four and it ends up being two or three, and then you’re deflating expectations. It’s all about managing those expectations. Keep a little bit of an ace up your sleeve, deliver more on the day and just enhance that trust level.

James Bell: I think too, for agents, don’t let the reaction of your owner to the feedback dictate how you then become with them. Stick to your process, stick to the way you’re going to deliver that information, because the owners are going to be emotional throughout the whole process, but if you stick to it, the result at the end of the day is a lot more consistent than an owner saying, “Oh well I’m disappointed with three groups through,” and then you try and cuddle them for a week. You’re creating the up and down relationship, rather than allowing them to come to the realisation.

Andy Reid: With a degree of empathy though. I think if you do have that disappointment, you’ve got to show a degree of empathy by saying, “Oh, I understand that that’s slightly disappointing, don’t get me wrong, I’m disappointed as well.” We’re not in the problem, we’re in the solution business, so agree and empathise that it is slightly frustrating, however, that’s why we need to do X, Y and Z in order to change our approach.

Talking about the process and things, we’ve got to make sure we’re all dynamic within that process as well and can adjust to different outcomes, because as good as we all like to think we are, in the end of the day, like we’ve all agreed, none of us know what’s going to happen, so we’ve got to make sure that the vendors are aware that there might be an adjustment in strategy. But I think giving them the full anatomy of the skeleton of the process at the start is super important, so that if you do have to have a crucial conversation, framework’s already there, and the feedback’s just putting the meat on the bones, so to speak, and they understand how it’s going to taste if it gets to a certain point.

Gavin Croft: To that as well, for me there’s one word right throughout an auction campaign that just rings true with buyer and seller for an agent, and it’s the word ‘responsibility’. It’s allocating it. So again, “Mr Seller, you’ve had three buyers through, you can change that, but that’s up to you.” So the decision’s there, we’re pushing responsibility back to a buyer to perform auction day, and they need to understand their role and responsibility, same as a vendor.

Tom Panos: Really good estate agents, so the good ones, have probably in this market had a face to face conversation with the buyer on the Friday and they’ve actually begun the education process on buyers where it’s been too much predisposed on vendors. Everyone’s been told ‘vendor meeting, vendor education’ but I think in this market, buyer meeting, buyer education, buyer phone call at 7 o’clock or 8 o’clock or 8:30 in the morning, not at 2 o’clock when the auction’s at 2 o’clock. Other things I would say Steve, that I see the real good agents doing is they’ve got this ability to read the play without having commission breath, asking the right questions and sort of having a rough idea at the status of where the buyers at.

I think good agents now ask buyers 2 or 3 days before they set the reserve. They’ll ask the buyer, “I’m going to see my vendor, I want to tell them what you think the reserve price should be and I think that they’re doing it.” I think they’re having those conversations and they’re going in and they’re sitting in front of the vendor and they said “such and such, such and such, such and such said they’ll be at the auction, they believe that this is what the reserve price should be and the reserve price doesn’t really matter that much because as we know is that reserve is changing even during the auction.”

The ones that I actually get turned off are the ones, when the auction is at 2 o’clock and they say to me “Tom, hang tight, I’ve definitely got 2 or 3 people that are probably just running late,” and then they’re getting on the phone and they’re ringing people at 4 past 2 and the people aren’t answering the phone and then I have to actually hit them with the realisation they’re not coming. I would say that what they do poorly is have crucial conversations.