Monthly Archives: September 2015

How do you negotiate best price…when there is only one buyer?

Booming markets over the past 3 years have meant that real estate agents have become facilitators of sales, rather than negotiators of them.

When there is one house and 3 buyers who desperately want it, an agent does not have to sell the property. They simply facilitate the bidding process to find the highest paying buyer – or highest bidder, if you are selling by auction.

Buyers are conditioned to accept extreme buyer competition in a boom, so they willingly accept the buying process agents ask them to go through.

As the market consolidates, the ratio of sellers to buyers evens out. Many agents are already reporting in the press that they are now dealing with less bidders per property than earlier in the year.

As a home seller, selecting an agent who uses a strategy that exclusively requires multiple bidders could be a strategic error.

How do you have an auction with one bidder? Given the recent shift in market conditions, its crucial you don’t sign up for auction unless the agent can adequately answer that question.

Amongst many other equally pointed questions!
If there is only one bidder for your property, the success of your sale is going to depend entirely upon your agent’s negotiating ability.

How do they negotiate the best price without any buyer competition? That is very difficult to do.

In a consolidating market, the right agent will always have a plan to get the best possible price for your home, regardless of whether there is buyer competition or not.

If there is competition in place, they seamlessly facilitate the process to ensure you obtain the best possible price.

Conversely, if the agent possesses the necessary negotiation skills to extract full market price when there is just one buyer in play, you will have selected the right agent.

How can you tell? Ask them about their selling strategies. You will know you are dealing with an amateur agent if the agent’s only negotiating tactic is to threaten them that there is ‘another buyer interested’.

You don’t want that type of agent acting for you when you are selling.

How’s the market? Some relief for buyers

September marks the start of the spring market and the end of the winter market. In summary, the winter market was a case of two halves.

Coming into winter, the housing market was experiencing unadulterated boom conditions. The feverish mood amongst buyers hit early in the year when the RBA cut interest rates in February and then backed up again in May.

Nearly every sale we conducted between February and early July was competitive. It became common that multiple buyers were trying to purchase the one property within days of the property hitting the market.

Winter is traditionally a season when stock is tight. Throw interest rate cuts into the equation when rates are at already record lows and it’s easy to understand why the market accelerated.

Furthermore, the interest rate cuts in 2015 had a stronger impact than earlier rate cuts for two reasons. The first being the banks did not pass the full rate cuts on to consumers in 2012 & 2013. The second being a 0.25% rate cut represents a bigger percentage when mortgage rates are at 5% than when they were at 7.5%. 7.5% minus 0.25% is 3.3% where as 5% minus 0.25% is 5%. Even though rates are at such low levels, any 0.25% movement, up or down, is still likely to have some effect on the market.

One of the standout sales over winter was the sale of 81 Trafalgar St Annandale that sold for $1,340,000 after 5 parties submitted offers in just 8 days on market.

Just when it seemed prices were unstoppable, events in early July conspired to temper buyer enthusiasm. The Australian Prudential Regulation Authority (APRA) enforced tougher lending standards on residential investors. At about the same time, Greece’s economy threatened to fall apart. Whether it was related or not to these events, a surge of new listings hit the market in late July and August.

Right through August, there were increasing signs each week that property prices in Sydney were moving from a growth phase to a consolidation phase. The most commonly used indicator of the property market is the auction clearance rate. It’s also the most fudged indicator, but that’s another story. In any case, the auction clearance rate declined each week throughout August, hitting a low of

73% for 2015 on August 29, being the last auction day of winter.

Does any of this suggest buyers will find a bargain in spring? Absolutely not. Prices are still up 15% for the year and look set to hold. Any settling of the boom conditions is good for the sustainability of the market.

It’s worth noting that buyer repayment amounts have not increased in line with house prices.

Broadly speaking, finance is 30% lower than 3 years ago and house prices are up 30 to 40% in the same period.

Barring a shock to the system, expect prices to hold relatively well, even if they don’t actually rise during spring.

Sellers looking to sell above the market may find that difficult and buyers chasing a bargain might do more chasing than buying.