The Invisible Tax That Costs Australian Home Sellers Between $30,000 and $130,000 — While They're Busy Celebrating
As Seen In The Media For 10+ Years
The gap between what your home sells for and what it could sell for is real, permanent, and invisible to you — unless you read this:
Whether you want to maximise your sale price or just avoid a mistake you can’t see coming, this is the most important thing you can read before you sell your property.
There is a problem with the Australian real estate sales industry you don’t know about.
Real estate agents are not the problem. There are wonderful people among them.
The industry has four built-in forces that make it almost impossible for agents to achieve the highest possible sale price for your home.
Even if you think you’ve sold well.
Two other factors ensure you never find out that you have sold for less than you could have.
The result is called the Invisible Undersell.
Whether they know it or not, the Invisible Undersell impacts every seller who deals directly with a real estate agent.
The Story of Colin and Sandra
Colin and Sandra, in NSW, found out about it the hard way – and by accident.
They’d sold their home. They were celebrating.
They chose their agent very carefully after thorough research.
He was a friendly, reputable, top-selling agent, with great reviews, who came highly recommended.
After the sale, another agent contacted Colin. He was angry.
He had a buyer who made a much higher offer for Colin and Sandra’s home while it was still for sale.
Colin and Sandra never saw that offer. Their agent had chosen not to present it because it would have required splitting the commission with the other agent.
A shared commission on a higher sale price would have been less than a full commission on a lower price.
Colin and Sandra had been undersold. They thought they did well.
This isn’t an isolated story. The only unusual part was that Colin found out.
What happened to them, happens every day in suburbs all over Australia. Not because of bad agents. Because of a bad system.
The Invisible Undersell:
Why Happy Home Sellers Sell For Less Than They Could Have
Without Ever Knowing
The Invisible Undersell is the reason why unwitting home sellers are often happy with their sale price (and agent), even when they have undersold by 3% – 9% ($30K – $130K, depending on the value of the property).
Unaware they’ve undersold, sellers even leave 5 star reviews for their friendly agent and recommend them to friends and family.
In a strong market, where prices are increasing, even a record price will often hide an undersell.
Below are the four causes of the Invisible Undersell, and two reasons why you’ll never know it’s happening to you.
Any single one of the four causes on its own is enough to result in an undersell.
The combination of these reasons practically guarantees a lower sale price than what you could otherwise achieve…
…even if you think you’ve done well…
…and even if you choose the most friendly, helpful and best-selling local agent.
4 Causes Of The Invisible Undersell
1. The commission rewards a quick sale, not the highest sale price
Have a look at the adjacent illustration as an example.
At a 2% commission an agent would make $20,000 to push to achieve a sale price of $1,000,000 for you.
This could take the agent several weeks and many hours or work.
Alternatively, they could convince you to sell within days for $950,000 and make almost as much commission – just $1,000 less.
It would obviously be quicker and easier to sell this home for $950K, than for $1M.
Plus the agent would make 95% of their commission on the quick and easy part of the sale.
How much incentive does this provide an agent to strive for the last $50,000?
What do you believe makes more sense for the agent?
Working for their last $1,000 of commission on your sale or moving on to their next $19,000 commission?
A percentage-based commission encourages agents to achieve a quick sale rather than the highest sale price.
This isn’t a theory. It’s been measured and proven. Two landmark studies found that real estate agents sell their own homes for around 4% more than their clients’ homes.
The first study is attributed to economists Steven Levitt and Chad Syverson, published in the Review of Economics and Statistics, and the second by Rutherford et al in the Journal of Financial Economics.
When it’s their own money on the line, agents fight differently.
This misaligned incentive gets even worse, as you will read in point 3.
2. KPI’s (Key Performance Indicators) measure turnover – not sale prices
The performance of real estate agents is measured by KPI’s (Key Performance Indicators).
Do you think any of these KPI’s measure the results achieved for vendors?
Agent performance is measured by two key metrics:
- Number of listings and
- Number of sales in any given period.
In other words: turnover.
Your home or ‘listing’ is just another tally mark on the whiteboard at the weekly sales meeting.
You may have heard the saying: “Whatever gets measured, gets improved.”
So what gets improved? Volume. Speed of sale. Turnover.
Not the sale price of your home.
Ironically, the ‘top selling’ real estate agents with industry awards are those who sell the most homes in the shortest possible time – and usually for less than they could have sold for.
Instead of seeing this as a warning sign, even intelligent home sellers fall for such ‘award winning’ agents.
3. Commission splits encourage and reward turnover – not sale prices
Did you know that real estate agents don’t keep all their commission? They must share it with their agency.
Most real estate agents only keep 40% – 80% of the total commission.
This presents two problems for sellers.
Firstly, it dramatically reduces the already small incentive, or reward for the agent to strive for the highest sale price.
If the commission was 2% and the agent only kept 60% of this, they would only make $600 for the last $50,000 of your sale price.
Does this look like a strong incentive to stretch your sale price?
The second problem with a commission split is that agencies use it as a reward to encourage their agents to sell more homes, more quickly.
For example an an agent who only sells 10 homes for $300,000 gross commission, only keeps 40% of that commission ($120K).
Conversely, an agent who sells 20 homes a year for $600,000 gross commission keeps 60% of that commission ($360K).
In other words, agents can make three times as much money by selling twice as many homes.
In other words, agents can keep a greater split (portion) of the total commission if they turn over more homes, more quickly, instead of fighting for the stretch price.
In short, agents make more money from more sales than they do from higher sale prices.
You may have heard the saying: “Whatever gets rewarded, gets repeated.”
And what gets repeated? Volume. Speed of sale. Turnover.
Not extracting the last $50,000 or $100,000 from your sale.
4. Agents risk nothing by not achieving the highest sale price for you
No real estate agent can ever care as much as you do about your sale price.
It’s not their home.
You are risking 5 – 6 figures in equity if you sell for less than you could have.
ALL the risk is assumed by YOU! This includes being locked into a contract.
Agents have no skin in the transaction and nothing invested or at risk (other than a little time).
You may think the agent risks their reputation if they undersell, but in the next section, you will discover why this is not the case.
You may be skeptical about these four causes of underselling and point to record prices real estate agents have achieved.
In a strong market, even record sale prices often hide an undersell.
In the next section, I will explain the two reasons why it is common for sellers to be happy with their sale price, despite having sold for less than they could have.
If you now believe the system isn’t designed to maximise your outcome, the next question writes itself.
Why don’t sellers ever discover this?
2 Reasons Why Sellers Can’t Tell The Invisible Undersell
1. “Range Camouflage” hides the undersell
No property has a fixed market price. There is only ever a realistic range, somewhere around 5–10% wide.
A property worth around $1,000,000 might reasonably sell for anywhere between $970,000 and $1,030,000.
A sale at $980,000 looks legitimate. The agent appears competent. And you may be satisfied.
But the $50,000 you left behind sits permanently in your blind spot.
This is why there are no alarm bells or sirens that go off when a home undersells.
This is why agents don’t risk their reputation by not achieving the highest sale prices.
In a rising market, you may even achieve a new record price despite selling for 3% to 6% below what your home could have achieved.
A sale within the range can hide an undersell.
2. Total lack of transparency
There is zero transparency when you are selling with a real estate agent.
It all starts with when they ask you to leave your own home for each inspection.
You’d be shocked if you knew the real reasons why they actually ask you to leave.
The real problem is that everything happens behind your back.
You can never hear or see what’s being said about you or your home.
You never see the offers that existed but weren’t presented.
You never know about the buyers who weren’t contacted, the negotiations that didn’t happen or weren’t pursued well, the market that wasn’t fully explored.
You will never see any tangible proof or evidence that the market was exhausted to uncover and achieve the highest possible sale price for your home.
Liz’s Story
Liz in Queensland learned all this the expensive way.
She had trusted her agent completely and was satisfied with the sale.
Weeks after settlement, she had a chance encounter with someone at a local shopping centre.
This person had inspected her property during the campaign. He mentioned that he had made an offer considerably above her sale price.
It had a longer settlement, which would have suited her well.
Liz’s agent never showed her this higher offer because the lower offer settled sooner, which meant that the agent was paid earlier.
The higher sale price would only have given the agent marginally more commission, which wasn’t as important to him as getting paid quickly.
Sellers Who Guard Against The Invisible Undersell Consistently Achieve Better Results
Cameron and Terena set a new street record price with the sale of their first property in Albany Creek, QLD and a suburb record with their second property in Deception Bay, QLD.
They achieved a $115,000 premium or 12% extra with their first sale and a $60,000 premium or 8% extra with their second.
Celine and Vlad avoided the Invisible Undersell when selling their family home in Frenchs Forest, on the northern beaches of Sydney, for well above $3.3 million.
By avoiding the Invisible Undersell, Terry’s spectacular Victorian residence in the famously up-market Melbourne suburb of St Kilda was sold for $4.5 million dollars.
The negotiations helped to increase his final sale price by $900,000.
John and Helen in Gordon Park, QLD avoided the Invisible Undersell to sell for 19% more than their local real estate agents told them they would.
Jill and Phillip scored $205,000 or 17% more for their home in Kurwongbah, QLD, than what they originally wanted by avoiding the Invisible Undersell.
The Tip Of The Iceberg
If this information is new for you, it’s only the tip of the iceberg.
As the saying goes: “You don’t know what you don’t know.” And there is MUCH more of that than you think.
Perhaps even more dangerous and costly is what you think you know that isn’t so.
There are many false beliefs that home sellers cling to from generations and decades of conditioning.
If you’d like to find out how many of these false beliefs you hold, you can do so on THIS LINK.
Most people who have read this page understand it. They nod their head because it makes sense.
Yet many still end up signing with their local ‘rockstar’ agent because it feels safe, easy, ‘normal’ and because that’s what ‘everyone’ does.
That feeling is real. It’s not a flaw in you. It’s just how decisions get made under uncertainty.
But it’s also exactly what starts the Invisible Undersell.
Every seller you see on this page felt that same pull toward the easy, familiar choice.
The only difference was what they did next.
If you’d like to discover two proven and safer ways (*not a private sale*) to achieve a 3% – 9% higher sale price for your home, you can schedule a free discovery call with me (David) by clicking the button below.
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Success Stories
Thrilled Vendors Across Australia Share Their Experiences
Kylie and Rod pocketed $100,000 more than with an offer they almost accepted through a local real estate agent.
Emma and Christian sold for $40,000 more than the highest appraisal from four of their best local ‘area expert’ real estate agents.
Jessica set a new suburb record, selling her home for almost $100,000 (12%) more than her best local agents said she would. Her success was even featured in news.com.au
Eliane set a new record sale price in her street, on the other side of Australia, far exceeding all her expectations.
Roger was so happy with the great result he achieved when selling his investment property in Paddington QLD, that he referred us to his family.
Paula and Brian walked away with tens of thousands of dollars more than by selling with any of their local real estate agents.
Lyn and Gordon were so happy with the results of the Stretch Price Formula that they returned to sell two more properties this way.
Terena and Cameron set a new street record with their first sale and a new suburb record with their second sale, using this method.
Celine and Vlad sold for over $3.3M using the Stretch Price Formula and would never use a traditional real estate agent again.
Feels safer to just go with any agent? That feeling is the single most common reason sellers undersell without ever finding out.
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