Weighing up Sale by Set Date

The vendor, ‘Mustapha’, ponders the three methods of sale that local agents have presented to him. The first two are well known – auction (“We are firmly against selling by auction – too many properties are passing in at the moment and we don’t need the auction day pressure to lower our reserve”); and private treaty (“Both agents advised against this as there is no definite end date. I thought that it would be in their interest to have the property listed for longer as it would increase advertising costs, but obviously I am wrong”).

Mustapha, whose forum posting was published online in May last year, then questions the third option – ‘sale by Set Date®’.

While tempted by the idea, he says an ‘independent adviser’ has just pointed out some potential weaknesses.

“You are going in blindly, submitting offers with little feedback until it’s too late,” Mustapha says. “This method could actually turn potential buyers away unless they fall in love with the house.”

Others within the real estate industry remain lukewarm on the concept.

John McGrath, chief executive at McGrath Estate Agents, isn’t convinced about the sale method’s merits.

“I’m not a great fan,” he says. “I do know sale by negotiation has got some momentum; some of our agents have used it successfully. I don’t personally endorse it, I think it’s a little bit half baked – it’s not quite private treaty and it’s not quite auction.

“Often they’ll say, ‘Offers over $600,000’. If I offered $601,000 I would expect to maybe buy it, but then the agent will say, ‘No, they won’t sell it for $601,000’. Why don’t they just tell you what they want?’. I find the more direct you can be with the consumers, the more they like it.”

While the method has auction traits, Will Hampson of My Auctioneer said the closed nature of the negotiation could work against the seller.

“Many times I hear third party stories from disgruntled buyers who have been down the track of a tender or expression of interest where they weren’t given the opportunity to increase [their offer]. They have indicated, had they been given that opportunity, they would have paid more. So, is that really beneficial to the owner?” he says.

Ryan Thompson, director of Auction Services WA and director and principal auctioneer at ACTON Real Estate Southern Suburbs, agreed. “While they’re quite popular, it tells me the agent doesn’t have the confidence to do an auction. Buyers are not being pushed to pay the most by the market forces available.”

Yet in the model Barry Plant Real Estate has developed – and trademarked as Set Date® – some of these concerns have been addressed, according to the company’s director and CEO, Mike McCarthy.

Mr McCarthy is open about the main disadvantage, “that some buyers do not like the fact they cannot see what others are offering – as in an auction situation – and may be reluctant to put forward their best offer initially, which is not dissimilar to a private sale,” he said.
Yet ensuring buyers aren’t let down by the process is a core component of how the deadline driven system is meant to work.

“For example, if [the agent] receives an early offer that is acceptable to the vendor, but they fail to follow the correct close-off procedures, they may end up not achieving the maximum price possible for the vendor, and also have some very disgruntled buyers on their hands,” he said.
“Likewise, if the registration of buyers is not handled correctly, they could end up with the same result. That is why our training and accreditation program is so important – our agents are not permitted to conduct Set Date® campaigns unless they have been accredited.”
He said the issue of price is handled in the same manner as an auction, and many private sales.

“The properties are generally marketed with a price quote range, which may be adjusted depending on buyer feedback and response during the campaign. Most importantly, offers are never shared with other buyers – the integrity of the system is paramount.

“Buyers are always advised to submit their ‘walk-away’ offer (the maximum price they are prepared to pay for the property).”

And herein lies what Mr McCarthy thinks is a key strength of the model – buyers can’t see what someone else is offering, often forcing them higher.
“Therefore they need to make their best offer, otherwise they may lose the property,” he said. “In an auction situation, they only need to beat the second best offer. How many times do we hear buyers say they were prepared to pay more, but didn’t need to?”

He says the method also avoids the ‘public failure’ that some associate with a passed in auction.

Frank De Raadt, principal at DR Realty in Redcliffe, Queensland, says while his firm has signed up to use the patented ‘Set Sale’ approach, he hasn’t had cause to use it as yet. Under the model that he uses, an independent valuer must provide a market valuation of the property, upon which a ‘buyer inquiry range’ is then based.

He says the three vendors who have considered the Set Sale method were initially turned off the model by the valuer’s price estimation.

Not agreeing with a vendor on price isn’t a problem that’s limited to this sale method, and Mr De Raadt remains a fan of some aspects of the Set Sale model, including its ability to garner the best offer from buyers who don’t know what anyone else is offering. Yet, as Mr De Raadt points out, this isn’t dissimilar to how he handles private treaty sales, where offers from prospective buyers are kept confidential from others looking to buy the property.

“We never reveal the offer of one party to the other,” he says.