PREVIEW – CHAPTER 8
How to achieve a quick sale
When selling a property most people suffer from two conflicting emotions.
The pleasure of a quick sale is apparent — the relief of making a decision, doing the work, investing in the sales process and achieving a great result in less than a month is tangible. Yet the pain of fearing you have just undersold your major asset in a rush is also real.
This leads us to the big question: is ‘time on the market’ the key to getting the highest price possible for your property? The answer to that is found in understanding the market conditions at the time you are selling. Time is continuous, unemotional and inflexible.
In a market where prices are rising, time is your friend. Time will help carry you towards your price goal. In a falling market, time is your enemy. It will stifle your price goal, erode your equity and destroy your confidence in being able to sell your home. In a falling market, the longer you leave your property on the market unsold, trying to hold out for yesterday’s price, the more opportunity you give it to drop in value. Even in a rising market, a property that remains unsold for a long time may become a lemon in the eyes of buyers. If left to go stale it will often take a massive reduction in price to stimulate buyer activity.
Time and price
Many industry experts claim that the key to achieving a successful sale is the correct balance of three essential components.
These are:
- 1. Presentation
- 2. Marketing
- 3. Price
Getting your pricing strategy correct will do more to achieve a quick sale than a slick campaign or a titivated house in a turbulent market. If a sale is not achieved in the first three or four weeks, the seller may need to either reconsider their pricing strategy, wait for new buyers to enter the market or withdraw the property from sale. Waiting for new buyers to enter the market can really blow your ‘time on the market’ right out.
Attracting multiple buyers
Most sellers would love to see multiple buyers bid strongly for their property and force the price up. Here is an example of a selling strategy that attracted multiple buyers and a quick sale. Mark was keen to establish a correct market price and sell his townhouse in Glebe, in Sydney’s trendy inner west. He knew that by quoting an attractive and realistic price, multiple buyers would be ready to inspect, make offers and negotiate.
There were 24 inspections and three offers in 26 days. Here is an example of the benefit of knowing your pricing and agency options upfront:
Lindsay and Paul contacted a high-profile auction agent who dominated the sales in their area. The agent suggested an auction with a $6000 advertising campaign. After six weeks on the market, the best buyer was only prepared to pay a price $50,000 short of Paul and Lindsay’s target. They decided that they had four choices:
- • Withdraw until another point in the property cycle
- • Accept the existing offer
- • Drop the price expectation and see if that attracted another offer
- • Leave it on the market without dropping the price and wait for a buyer at their price
The existing offer was just too low for them to accept. The agent had put them through an aggressive conditioning process to lower their price which made them feel that staying on the market with that agent was not going to result in a happy outcome.
Paul and Lindsay decided to withdraw from the market until the agent’s agency period ran out. This was painful as they effectively wrote off the $6000 they had spent on advertising.
Four months after that experience, Paul and Lindsay relisted their home. They used another firm, one that did not charge commission or advertising unless they were able to achieve a sale. The market had improved by a few percentage points and now the property was a fresh listing as opposed to failed auction stock.
Within three weeks of re-listing, the sale was concluded at a price in excess of what had been previously rejected.
When sellers price accurately, there is a power shift away from buyers towards sellers. Attracting multiple buyers who try to buy your property because you had a realistic pricing structure can pay great dividends. The final sale price can be pushed up to what you may have thought was unachievable in the first place. The beauty of beginning with a realistic pricing strategy is two-fold. First, it allows you to achieve a quick sale and second, buyers suddenly focus on how much they are prepared to pay for your home. This is a much better sales strategy than you focusing on how much you are prepared to drop your price in order to achieve a sale. Having multiple buyers trying to buy your property assures you of obtaining the highest price possible.
Bargain hunters
Bargain hunters love sellers who haven’t learned the ‘time on the market’ lesson. They also love to watch a falling advertised price.
There is no problem if bargain hunters don’t like your price. However, it is counterproductive if fair-minded buyers reject your property on price. One of the worst ways to market a property is to load the initial asking price with the intent of coming down in price over time.
Unfortunately, this is what most people tend to do.
The best buyers will reject your home based on its initial high price and are unlikely to return later even when your price has been dropped to a fair market price. Those buyers will have moved on and bought other realistically priced properties.
If, at the completion of your marketing campaign, your property remains unsold and you are unhappy about the price buyers are offering, simply do what most smart sellers do — don’t sell.
PREVIEW – CHAPTER 13
Real estate magazines
If you are a home buyer, what do Brighton, Box Hill or Broadmeadows in Melbourne have in common for you? What about South Brisbane, Spring Hill and St Lucia in Brisbane? Perhaps Hackney, Heathpool and Hectorville in Adelaide or Belmont, Bentley or Bellevue in Perth or Balgowlah, Ballina and Balmain in Sydney?
Other than being in alphabetical order these suburbs have no commonality for a home buyer. They have no connection geographically, nor are they likely to have similar features, characteristics and location advantages for buyers considering purchasing in any one of these suburbs.
Yet magazines produced by real estate agencies continue to promote homes in suburbs across an entire metropolitan region in each capital city. Whenever you see mass advertising like this, mass wastage of sellers’ money is taking place.
Real estate magazines like these are incendiary devices, highly flammable and ready to burn a house-sized hole in your wallet. Once you understand what is happening here you will be able to avoid becoming a victim.
Some agents will tell you their in-house marketing has a massive reach. Printing 15,000 copies each week gives the magazine a potential circulation (mainly via cafes and shops) of 15,000 people. This is not a database of 15,000 qualified buyers nurtured by a proactive real estate agency that hones its ability to follow up and close sales.
This is a demand from an agency or franchise that wants you to fund their brand recognition campaign to potential clients. Furthermore, they make a profit from selling the advertising space to you. And this demand is likely to heighten as more agents lose revenue from advertising in traditional newspaper channels. At the same time many are discovering there are big profits in becoming publishers themselves.
One high-profile Sydney firm swears by them; the advertising profits derived from a 130-page weekly magazine are undeniable but does it help to sell houses as well as an online ad?
Interestingly, on the firm’s Facebook page they posted an article in March 2013 that stated “The internet has now obliterated print – the game has been won – 92% of buyers use www as their primary search tool”.
The likelihood of time-abundant random coffee drinkers and shoppers flicking through free real estate rags and finding their dream home then calling to close the deal is improbable. Quite close to miraculous in fact.
To spend thousands of dollars advertising your property to thousands of non-prospects with no ability to follow up those prospects is a flawed marketing strategy.
Look out for the push to ‘take out a page’ in an agent’s vanity publication; it couldn’t be a bigger waste of money.
PREVIEW – CHAPTER 45
Real estate poker
There is another buyer …
Competition increases prices. Agents know it and they use competition to achieve a better price. That’s their job, after all. As a buyer, it’s harrowing when you can’t accurately determine the legitimacy of the agent’s oft made claim ‘there is another buyer’. If you swallow the ‘we have another buyer’ hook, it can cause you to react irrationally and potentially overpay. To dismiss the threat entirely can also cause you to miss out on your dream home if there really is another buyer lurking in the background.
So what should you do?
In a strong seller’s market, buyer competition should be expected. There is little doubt you will need to produce the goods in a timely fashion to secure your new abode. The reverse, of course, is true in a soft buyer’s market.
A lack of multiple buyers for any property is essentially why the auction system fails; it sends the loudest possible message that the property is uncontested above the closing bid. To navigate the negotiations well, there are a few simple rules you can keep in mind when faced with the ‘there is another buyer’ situation.
Bluff and bluster
Remain open to all possibilities. There may not be another buyer, but there also may be. Just don’t form a strong opinion either way because you may increase the risk of being blind-sided. Focus on what the home means to you and what it is worth to you. Disregard what other buyers may or may not do and what they do or don’t think the home is worth.
Like all competitive scenarios, if you focus on the opposition, you are more likely to make mistakes. When making an offer, don’t play games with what you think other competing buyers may offer. Decide what is more important to you — buying the right home in the right location or risking the purchase to try and save $10,000 or $20,000? Offer your best price for the home and walk away if the vendor does not accept it.
Submit your offer on a contract. Give the owner and the agent an offer that can be banked. Many buyers claim they will pay a certain amount for a property, but when they are called upon to do so, they vanish.
If you turn your offer from verbal interest into a legally binding contract offer, you up the ante on the competition. Sometimes, a lower offer will secure the property because it’s a deal on the table as opposed to someone else’s non-binding intent.
Remain calm. Irrational thinking is the enemy in a competitive situation. This can be hard if you feel you are being deceived. If another buyer is prepared to pay more than you are willing or able to, emotionally let go of the property.
The other buyer may not complete the deal and you can then re-enter negotiations from a much stronger position. You may even find a better home in the meantime. If you are confused by the sudden interest in the home, identify what may have caused the renewed interest. Has there been a recent price reduction or interest rate cut? Did a recent sale elsewhere suddenly justify the vendor’s asking price? Have the owners done some minor renovations or repairs which enhanced the presentation? Has the market experienced a slight upturn in confidence?
Economists will tell you it takes two to three months for the positive effects of an interest rate cut to flow through to the market. Some buyers will only act when they know that the property is ‘in play’. Many buyers will say to the agent, ‘We are interested. Call us if someone makes an offer.’
Handling this type of buyer is tricky, because they are simply waiting for other buyers in the market to make a move which may or may not justify the vendor’s price expectation. The agent handling the sale needs to be very aware of this tactic some savvy buyers employ.
The first acceptable offer is the hardest to get onto the negotiating table. Once the agent is in possession of an acceptable offer and working towards closing the sale, the interested buyers on the sideline can be induced into making their move. This is when a lethargic campaign can come to life, surprising the buyer who thinks the agent is all bluff and bluster.
Market price
When a property remains on the market for a long time, it is usually because the owner is looking to sell at a price higher than what the market is prepared to offer. Most buyers, however, are not prepared to pay above market price for any property unless they perceive that the market is rising by a percentage point or two. Then, suddenly, an ‘overpriced’ home can become well priced.
Alternatively, where the owner has overpriced and their home remains unsold, if they adjust their price expectation down to the market price they will often attract multiple buyers. As a seller, you know you have hit market price when multiple buyers try to buy your home. When a property sits on the market for months, buyers and neighbours will ask themselves, ‘I wonder what’s wrong with this property?’
This question can cause some buyers to form negative and incorrect opinions about the property. For example, unique homes require buyers with the same unique criteria. It can take time to find such a match. To question the merits of a stunning home because it has not sold within 60 days can sometimes be a mistake.
To watch a property flounder on the market, only to be told there is another interested buyer just as you make an offer, seems to be a dubious ‘coincidence’. But that is often how it goes. A price drop, a slight increase in market confidence, or an improvement to the property can spur on a new brigade of keen buyers.
Lies, truths and half-truths
Yes, some agents will lie. They will say there is another buyer when there isn’t. In nearly all circumstances, the agent’s lie will come to the surface in time. Creating a competing yet non-existent buyer is the most incompetent negotiation tactic an agent can use.
An agent who lies will have their lies exposed the more you engage with them. Don’t email back and forth with an agent, talk directly with them. Ask lots of questions and take journal notes. The truth, whatever it may be, will soon become apparent.
There are agents who will tell you the truth. Even though a home has been on the market for three months, three new buyers are ready to make offers. An agent may even tell you the details on how improvements to the economy, or the property, or both have increased its prospects.
Agents will also often tell half-truths, such as, another buyer offered more than what you have. The half-truth being that the other buyer made the higher offer six weeks ago and has since bought elsewhere.
Playing the game of real estate poker does require a couple of talents: the ability to smoke out a lie and the skill of calmly playing your own game without worrying too much about your competitors.
These are skills worth honing if you intend to win.