Residential sales tactics often include advertising listings at a lower price, whether for sales or auction purposes, in order to attract enquiry and then manipulating emotions to attempt to have a potential buyer bid or pay a higher amount than they had originally intended.
However, Management Rights listings work in reverse. The prices advertised are normally higher than what the agent or seller realistically expect to achieve.
It’s important to acknowledge that the real estate industry isn’t all smoke and mirrors – most agents are not intentionally out there to do the wrong thing. But the tactic of over quoting multipliers to get listings has been around forever; lets face it, every seller wants to hear the highest price, which means an agent who appraises a management rights business accurately in the current market may lose listings as punishment for their honesty!
This is often referred to as ‘buying a listing’ where the agent will quote the highest price to endeavour to ‘win’ the listing. But, in the end, who does win? Certainly not the seller! Even if a contract is entered into chances are the multiplier will not stack up and the contract will fall over, and then both buyer and seller are up for professional costs. Once again, no winners here!
Keep in mind that a listing price differs from a sale price. A listed price is always the maximum the agent hopes to achieve – a selling agent works for the seller and is therefore paid a commission on the selling price. Hence, the higher the price means the higher their fee.
I encourage all potential buyers of management rights to do your homework and keep an eye out for agents advertising exaggerated multipliers on listings. These tactics tell me that either the agent has no idea about management rights values in the current market, or they are treating you, the buyer, as an un-educated individual on what price you should expect to pay.
Unlike residential real estate sales, management rights businesses sales are not recorded on any data base, therefore, valuers will contact people such as myself to assist in sourcing sales evidence that is current in the market place. Without this knowledge the multiplier for valuation would be limited and possibly even unreliable.
There are many variables in determining the multiplier on any given building and they can vary dramatically for many good reasons. Buying a management rights business is a more complicated process in today’s market than ever before, so ensure you have the right experienced professionals working for you.
Wesley Venz Venz Management Rights Buyers Agency