Monthly Archives: March 2015

4 Questions for Home Sellers

Once the decision to sell has been made, a lot of questions suddenly arise that had not required consideration up to that point. Asking and answering the questions that arise prior to acting will ensure a plan emerges to guide you through the process.

Is it best to buy or sell first?

Most people hope to buy and sell on the same day. Very few achieve this near impossible feat. Instead of aiming to buy and sell on the same day, the real goal should be to settle both transactions on the same day. So regardless of whether you buy or sell first, aim for a delayed settlement. Then use the delayed completion to execute the second transaction with a joint settlement date on the purchase and sale.

If you have a choice between selling first and buying under pressure or buying first and selling under pressure, it’s usually safer to buy under pressure. The risks are definitely higher when you buy first – knowing these risks is crucial prior to acting.

How many agents should you interview?

If you are a first time seller or selling for the first time in a long time, meet a multitude of agents. Whether you like and respect real estate agents or not, once you employ one, they are negotiating with your money. You owe it to yourself to locate the right one. If you are an experienced property seller, you will be in a much better position to identify the right agent, even if it’s the first one you meet with.

Does everything sell by auction?

Two facts, firstly real estate agents love auctions. They love auctions more than consumers do. Many consumers are talked into auction against their intuition. The second fact is the minority of properties in the Inner West and Sydney as a whole sell at auction. The vast majority of properties sell by way of negotiation. Agents will push the sense that ‘everything goes to auction in this area’ to justify the sale process. Understand the facts before falling for the spin.

Where should we price the home?

Price high? Price low? No price at all? It’s a challenge to know what the correct price for your home is prior to listing, particularly if there is a variance in the agent’s estimates. One seller in Newtown recently received a spread of $1 million from the five agents they interviewed. If you price too low, you mislead buyers & run the risk of setting a low expectation in the marketplace. If you price too high, you can turn the best buyers off your home.

The best price to list at is a market price. A market price is the price point where there is more than one interested buyer, without duping buyers into bidding on a property they are unable to afford. A few genuine buyers will create sufficient buyer interest and competition for you to ascertain the best buyer in the marketplace for your property.

Article: The Property Observer: Under and overquoting agents at epidemic proportions

JONATHAN CHANCELLOR | 15 MARCH 2015

Two prominent Sydney real estate industry operatives and authors, Peter O’Malley and Neil Jemnan, have seized on the underquoting reforms signaled by the NSW government to highlight their trenchant opposition to the auction system.

Peter O’Malley says if the Baird government actually policed under quoting by estate agents, “it will cruel the auction system”.

“The auction system relies on under quoting,” Peter O’Malley tweeted.

Overquoting to sellers and underquoting to buyers was at epidemic proportions nationally, according Jenman.

“Thousands of agents do it!,” he tweeted.

The anti-auction campaigner added that many buyers so detest auctions, they won’t even inspect homes for auction.

“So, if you’re selling, don’t lose buyers by auctioning your home,” he suggests.

“Yes, you can get a high price with auction but you rarely get the highest price.”

Jeman also added at least 80% of money spent on real estate ads is needless.

“Sellers are ripped-off,” he said adding the newspapers stay silent as they need the money.

He revealed one “big” agent admitted that the kickbacks he got from newspapers on sellers’ advertising money paid the lease payments on his flash car.

Victorian estate agent John Keating, who believes in reserve prices disclosed during auction marketing, commented the call for real estate auction rules reform to stop the insidious practice of underquoting should be coming from within the profession and be a bipartisan political issue.

“Stopping underquoting would be welcomed by nearly everyone from first home buyers to the Reserve Bank – except perhaps some rogue estate agents,” Keating said.

“Rogue agents, many of whom have very high profiles and systemically deceive buyers with underquoting, bring the trustworthiness of all estate agents into disrepute.”

Investing in the investment

Maintenance is often viewed as an expense by landlords, unwanted and often unplanned at that. However, it’s best to deem money spent on maintenance as an investment rather than an expense. Expenses don’t offer a return on investment, the money is gone for ever once the expense is paid.Maintenance really is an investment in your investment property that will either make, save or earn you extra income into the future.

Make money through maintenance

Maintenance and repairs will make your property more valuable and ensure that the value of your home rises on trend with the broader market, if not above it. Buyers can often tell the difference between a treasured home and a long-term investment property. Homes are usually maintained better than investment property. Sure the landlord has saved money over the years on maintenance but the “saved money” can be wiped off the sale price and more to boot.

Maintenance along the way makes the investor money in the end.

Save money through maintenance

A small but non urgent maintenance job left unattended can quickly become a large expensive issue. If you are vigilant and proactive with maintenance, you will spend a bit more in the beginning and save a lot more in the end.

It’s uncanny how the property manager and tenants attitude toward a property often reflects the respective owners. If the owner is attentive and responsive to maintenance issues, so to will those around them. An attitude of attention to detail can save investors on many fronts.

Earn money through maintenance

The one major mistake landlords make with maintenance is they assume the tenants will benefit at the landlords expense. This is completely false. When a property is well maintained, both the landlord and tenant benefit. And the relationship is far more cordial.

To prove the point, consider the family home and the long term investment property competing in the market for a tenant. All things being equal in regards to the properties features, if a family decide to lease their treasured (maintained) home out for the first time, it will nearly always lease quicker and for a better price than a pre-existing “investment property” that has not been maintained.

Well maintained properties lease quicker and lease for more. The maintenance earns the landlords more whilst providing a happier and better quality tenant.

Loss of Control

Each weekend up to 800 properties are auctioned across Sydney. Agents tend to judge the success of each campaign relative to the reserve price. If the property is handed in below the reserve price, it means that the campaign has failed. If bidding reaches or goes over the reserve price, the auction is judged as having been successful.

Many homeowners are unaware that at or above the reserve price the auctioneer can legally sell the property on behalf of the vendor. Once the auction reaches the reserve price, the agents are in full legal and practical control of the sale.

The seller has effectively lost control of their property at the reserve price.

A lot of consumers are aware of the power that an auctioneer can exert if required. As a defensive play, many vendors simply set a high reserve. But the agents have many tricks to ensure the bidding and the reserve meet ‘on the day’.

Some of these tricks involve getting the buyers up in price and many involve getting the reserve price (the owners price) down to ‘meet the market’. Once the reserve has been met, if the bidding keeps going, great. If not, well at least it sold.

If you are aware of some the reserve price tricks that could be used on you during an auction campaign, you will be better prepared and more able to defend yourself. Here are five (5) common tricks you should be aware of.

1) Setting a high reserve can lead to intense pressure at the auction

 While many vendors sign up for an auction with the apparent protection of a high reserve, most agents know there are several points in the campaign where they can pressure a vendor to lower their reserve. One of those is at the auction itself.

 If the auction stalls below the reserve price, the auctioneer will halt proceedings while instructions are sought from the vendor. Immense pressure is then put on the vendor when everyone who has gathered to watch the auction turns and looks at them to see if they are going to ‘meet the market’.  Agents only need an affirmative nod of the head to drop the reserve price to where the bidding has stalled and suddenly ‘it’s on the market’.

2) A (low) buyers guide becomes the reserve price

A low reserve will attract lots of bidders. A price guide below the reserve price will attract even more bidders. Apparently the more bidders attracted to the auction, the higher the price, even though you attracted them with a low price in the beginning.

As a seller, if you agree to market your home using the flawed logic of ‘a low price attracts more bidders and a higher sale price’, be prepared for deceitful tactics to be used on you in return.

If the auction stalls below the reserve price, the agent and buyers will expect you to honour the advertised price guide. After all, ‘you agreed to market your home at that (low) price’.

3) Conditioning and Crunching

Conditioning is where the agent praises your home to win listing and then systemically points out its faults during the campaign to drive your price expectations down. Some agents condition subtley, others are more transparent and crass in their execution of the strategy.

It’s normal for a low offer or two to be submitted to the owner prior to the auction day. It’s a part of the conditioning process, softening the seller up for auction day.

The crunch comes if the bidding stalls below the reserve. The agent portrays an unmistakable sense that the deal has to be done ‘today’ before we ‘lose them’.

If the auction stops short of the reserve price and the agent insists you drop the reserve to sell today, resist the crunch. Sales books are full of tactics teaching salespeople how to overcome, ‘no’ and ‘we want to think about it’.

Aside from the property not selling “under the hammer” is it really that negative if you choose to think about it? In a rising market like we are experiencing at the moment, the buyer is under more pressure than the seller.

4) Stimulate the bidding

At auctions, there are often a number of bidders who will hold back until the reserve price has been reached. If the auction has stalled agents will often encourage an owner to drop the reserve price to ‘stimulate the bidding’ and draw out the reluctant bidders.

Agreeing to this tactic legally puts the property on the market at a price you as the vendor never would have dreamed of selling at in the beginning of the campaign. It is a massive gamble to drop the reserve price in the hope that you will stimulate the bidding. It is an all or nothing tactic from a vendor’s perspective. It’s great from the agent’s point of view though given they get paid even if the property sells at the lowered reserve price.

5) The emotional buyer that’s going to keep bidding

“We stopped bidding because the other bidder was just going to keep on bidding. They really wanted it!”

How many times have you heard this or a version like it from the under-bidder? What they are effectively saying is that the property would have sold for a higher price if only there was another buyer around to fuel the bidding. As a vendor, once you are over reserve, you can watch the emotional bidder blast the competition out of the water. Even though its obvious they would keep bidding, you legally have to sell to them when the second bidder stops bidding.

Yes! You have to sell to them even though they would have paid more for your home.

The crowd will clap and the agent will tell you how much over the reserve he or she has achieved for you.  But you could have achieved more for your property had you selected a superior selling method.