Monthly Archives: April 2014

Burning Money.

When interviewing agents to sell your home the more agents you meet the more you will be confronted with the dilemma of whether to spend money upfront to advertise your home.

This cash — your hard earned and after tax cash — is burnt in a matter of weeks if you don’t achieve a satisfactory sale. Many times, if the advertising money runs out before a sale has been achieved the agent will even ask for more cash to fund needless advertising.

But didn’t you engage an agent to sell your home? Then why would you let them transfer the cost and the risk of selling your home back to you?

The best answer is this: Don’t do it. It is too easy for agents to smoke someone else’s money o flashy, foolish promotions.

What attracts home buyers?

Finding a home buyer is so simple that it has confused most agents. Buyers are attracted by the home, not the advertisement.

How not to smoke your profit

No buyer has ever bought a home because they liked the real estate agent’s advertisement. Excessive advertising does not produce a sale. Here’s an $8000 example:

A magnificent home in the Sydney harbour-side suburb of Birchgrove was the subject of two expensive advertising campaigns, yet the property’s contemporary design and panoramic views remained unsold for months. The property was eventually withdrawn from the market. As the buyer succinctly put it, ‘People began to wonder what was wrong with it.’ In most cases, where the advertising bill is the price of decent second-hand car or a European holiday, there is absolutely nothing wrong with the home — it has just been overexposed to the market.

After some time had elapsed, the seller engaged another agent to locate a buyer on the quiet without advertising. This was done in order to avoid any further damage to the value of the home because of its earlier overexposure to the market. A buyer was quickly sourced from the second agency’s database and contracts were exchanged within 14 days of re-listing.

Cut through questions

There are two magnificent questions home sellers generally fail to ask before ‘investing’ $5000 in a print advertising campaign:

1. Who pays for the advertising if the best offer is below what we want for our home?

2. Can we find the right buyer using a medium cheaper than print advertising?

If sellers would just ask these two questions of any real estate agent who asks for advertising money upfront and paid attention to the answers, millions of dollars would not go up in smoke across Australia every week.

If real estate agents had to spend their own money advertising properties, the amount of cash spent on real estate advertising would plummet. If an agent recommends you ‘invest 1 percent’ of your home’s value on advertising and marketing, agree to sign up immediately for their recommended campaign but on the basis that you only have to pay the 1 percent advertising bill after the property has sold. If the advertising campaign does not produce a buyer, then the agent pays for all the advertising. You will find out very quickly just how much advertising is really needed.

Don’t do it.

Why print doesn’t add up.

The real estate industry’s greatest fear is that home sellers will work out how easy it is to find a buyer for their property without using a real estate agent. Companies that help home sellers to market their properties without agents by listing their homes privately are emerging in larger numbers each year precisely because sellers are discovering this principle.

How do you find a buyer without using a real estate agent?

Just do what an agent would do. Put an ad on the Internet and a small inexpensive one in the paper, put a ‘For Sale’ sign on your property and list it with a fair asking price. These three marketing strategies will have buyers beating a path to your door. It really is that simple.

Real estate agents have two primary roles when employed by a home seller. The first is to find interested buyers. Different agents use a variety of strategies to achieve this objective. Some will focus on newspaper ads while others rely mainly on the Internet, ‘For Sale’ signs and agency databases.

The second objective of the agent is to negotiate the highest possible price with the best terms for the home seller. Some agents can achieve this objective but many can’t. Too many homes are undersold by agents across Australia each week by agents. All private home sellers are capable of underselling their property but it is very difficult to tell how many actually achieved the best possible price in the market once their homes were sold.

If a home seller feels they could competently negotiate the highest possible price their best buyer is willing to offer, the only real value a real estate agent can offer is convenience. A competent agent may save the home seller valuable time and effort.

Underselling a property

Most agents spend excessive amounts of money finding buyers and then use selling methods such as a public auction which undersells properties. Unfortunately, the massive amount of money spent by agents looking for buyers is the home seller’s money, not the agents’.

So, if the home seller is paying upfront for advertising and carrying the risk to find a buyer (all of which they could do without an agent) what is the home seller really paying an agent for? The answer is this: they are buying the agent’s negotiation skills (or lack thereof) and strategic knowledge of the market.

If you feel an agent does not possess a high enough level of negotiation skill to sell your home or sufficient experience in the market either find another agent or sell the home yourself. By placing your property on the Internet at a fair market price you will quickly find plenty of interested buyers. It will then be up to your negotiation skills to conclude the sale at the highest possible price the best buyer is prepared to pay. Right now it costs a real estate agent a little over $1500 per month to list every property they have for sale and for rent on a major real estate website.

For example, if an agent lists 20 rental properties and 20 properties for sale on domain.com.au that works out at a cost of just under $40 per listing per month. A private seller can list their home for under $500 on domain.com.au and access the same buyers as the agent. This is a saving of $4500 if the home seller is asked to part with $5000 for a print advertising campaign.

So when selling your home, your options are these:

•Pay for the most cost-effective marketing via an agent’s database while paying for their negotiation expertise and market knowledge.

• Market your property and negotiate the sale yourself.

• Or, if you are unaware of how to play the game, pay for expensive and useless mass print advertising.

It’s your choice.

 

Is winter a good time to sell?

As Easter passes and the cooler weather sets in, many people considering going to the market will be faced with a conundrum – sell in winter or wait until spring.

The impact of the season on the campaigns success is often misinterpreted.

The winter vs spring debate roles around every year with predictions of low or no activity over winter and a plethora of new listings ready for the spring market.  Presenting better does not always mean higher prices.

In 2013 the Sydney real estate market experienced growth of 14%. Growth was not orderly. The majority of the growth came in late autumn and winter as low interest rates and low stock levels combined to create near perfect selling conditions.

Winter is often under-rated as a selling season. The fact that many competing home sellers hold their properties for the spring creates a shortage of stock on market.

The presentation may not be as good in winter, but does that really matter if the price is right?

Identifying the right person for the job

Like all trades, there are good lawyers and conveyancers and some not so good ones. Whether you are buying or selling, having the right legal advice can be crucial to ultimately securing your dream home. Whether buying or selling, reaching a verbal agreement and having a contractual agreement are two very different situations. A good real estate lawyer will ensure that you migrate seamlessly from your verbal agreement to exchanging contracts without incident.

Many people scrutinise multiple real estate firms when selling, yet simply go searching for the nearest or cheapest legal advice for the same transaction. This haphazard approach can sometimes turn the process of conveyancing into a world of drama and it usually occurs at the most crucial time of the transaction.

There are two errors people can fall into when appointing someone to do conveyancing.

The first is that they don’t know what to expect from a lawyer, so they look online until they find the cheapest one.  Petrol and milk are products which should be purchased on the basis of price. Lawyers handling the transaction of your most valuable asset should be engaged on the basis of competence first and price second.

Buying real estate is a long way from a corporate takeover, so you don’t need to pay excessive amounts for a high powered lawyer to guide you through the nuances of the Conveyancing Act. A lawyer with experience and a track record of success in conveyancing, at a fair price, will ensure that your legal position is protected.

The second error many people fall into when hiring a lawyer is that they hire a lawyer who does not really want the job. The lawyer takes the brief out of loyalty to the client, even though they specialise in other areas of law.

As an example, a good corporate lawyer does not necessarily make a good real estate lawyer and vice versa. Yet if a client feels loyalty towards a solicitor who has helped them in the past, that solicitor may feel obligated to take the job on in return – even though they don’t really want it. In extreme cases, the file is passed off to a paralegal or junior in the office and given little consideration by the lawyer who was engaged by the loyal client.

Conveyancing is generally a straight-forward process for a lawyer. But about 1 in 20 transactions require the involvement of an attentive competent lawyer, when complications arise. Murphy’s Law suggests that the transaction which has been delegated down the pecking order by the lawyer, is the one that will require the most skillset from the lawyer.

If your preferred lawyer does not do real estate work on a daily basis, it is a good idea to ask them straight out if they really want to do the job? Then, ask if they will be handling the matter personally? Candor like this ensures that everyone will be on the same page and that you won’t be left floundering during negotiations.

Real estate agents and lawyers

A good working relationship between your lawyer and your agent is also crucial when negotiations begin.

Before a property can be listed for sale, the vendor’s solicitor must prepare a contract of sale on behalf of the vendor. This contract is a legal requirement, which must then be given to the listing agent prior to the property being marketed.

Once a buyer or buyers express an interest in the property, they take a copy of that contract to their own lawyer for review and negotiation.

In a competitive market such as we have at present, there is every possibility that multiple buyers will be trying to secure the property. Whether you are buying or selling in such a situation, the agent and lawyer need to work closely together and in sync.

As a seller with multiple buyers in play, it’s very much a case of the more buyers the merrier. Tactically, you want all buyers to be satisfied with the terms of the contract so that their respective offers become binding upon acceptance. There is nothing worse than declining a contract offer for a higher non-binding offer, which eventually crashes.

A good real estate lawyer acting on behalf of the seller will professionally and rapidly move all interested buyers past the contract review phase. The negotiation can then quickly go back to the agent for setting up closure.

As a buyer trying to secure a property in a buoyant market, speed can often be that crucial ingredient to success. Most sellers will take an offer on a signed contract far more seriously if the contract has been reviewed and negotiated by the purchaser’s lawyer.

Presenting an offer with such certainty can often be the difference between securing your dream home quickly or continuing to look for a suitable alternative.

A good real estate lawyer won’t be able to ensure you buy or sell at the right price, but they will be able to put you in the best possible position to do so, with a minimum of fuss at a fair price.

Paying the price

Is a reduction justified?

After months of searching for the right property, the joy of finding a suitable home is soon replaced with the work of securing that property for the lowest possible price. In understanding who any unreasonable party in a negotiation might be, it is important to remember that fear is pulsating through both the buyer and the seller. The buyer’s fear of overpaying for a piece of real estate is equaled only by the seller’s fear of underselling their family home.

What should be a normal negotiation process can quickly descend into a ‘the sellers are greedy’ and ‘the buyers are bargain hunters’ battle of wills. An important point to remember about modern real estate transactions is that the Internet has enabled buyers and sellers to become quickly and thoroughly informed about the market and how it relates to their property or their search for the perfect home.

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