Monthly Archives: April 2016

Expensive Internet ads

Over the past decade, real estate agents have replaced expensive newspaper ads with expensive Internet ads.

Agents strongly recommend expensive Internet ads to vendors, but vendors are asked to foot the bill.For agents – It is easy to be passionate about an expensive product that they are not paying for. Any expense during your sales campaign must be linked to a higher price.

Real estate agents love a motivated vendor. One of the easiest ways to get the home sellers motivated is have them invest in a multitude of products before the campaign begins.Agents are acutely aware that the vendor is more likely to ‘meet the market’ if they can convince the vendor to spend thousands of dollars upfront on expensive web ads.

Before committing to expensive Internet ads that simply increases the agent’s corporate profile, ask yourself and the agent, what justifiable benefit do expensive web ads bring to your campaign?

Home buyers are attracted to nice homes not expensive ads.

Profitable Renovations – How to add value beyond cost

Once you decide to sell a property any money that you put into the property should be deemed as an investment. This applies even if you have bought an un-renovated property that you intend to sell.

The purpose of investing is to make profit. Therefore, each dollar that is invested into the property should be linked to profit. Many people make the unfortunate error of putting a brand new kitchen with high quality appointments into the home just before they go to market.

The brand new kitchen may improve the sales price, but if a $50,000 kitchen adds $60,000 in value, is the effort, cost and stress worth it? Often the $50,000 kitchen only adds $30,000 or $40,000 to the end price, making the investment of the kitchen a loss.

Television shows are full of people making renovations look fun. To prove the point that renovations are not all high times and high profits, take the results from The Block over the past 5 years. Whenever the properties have a commercial reserve price set, the auction often fails to meet the reserve. Only when they have an artificially low reserve does The Block look fun.

Let’s call a commercial reserve, purchase price & costs + renovation costs = reserve price.

Who will ever forget the devastated contestants in the 2014 series of The Block who gave up 3 months of their lives to win …. nothing. This happens every day in the real world. In the real world, renovators are not given free labour and subsidised product from sponsors either. Keep in mind that good television and renovation profits are separate events.

Profitable renovations fall into two categories. Works that can be done below retail costs and retail priced works that add value beyond cost.

Works below retail costs
Many renovations add around $1 for every dollar that is invested into the property. If you are undergoing a structural renovation, to create true and meaningful profit from the works, you need to be able to get the works completed at a lower price than what a builder would charge a client. The amount you save on the works will flow through as profit on the end product.

This is why many developers/builders do so well out of un-renovated/unlivable properties. There is a huge upside in the dwelling and they can get the works done at a price that produces profit. The disrepair of the property frightens most if not all homebuyers that plan to pay retail costs on the works.

Retail priced works that add value beyond costs

Paying full market price for works and profiting on those works is difficult but possible. If you employ a painter to paint the house for $15,000, it is very common to see the works add $30,000 or $40,000 in value.

As a general rule of thumb, painting, carpeting and landscaping are works that will create profit beyond the costs of works.
Market growth often masks the true impact of renovation costs. If your plan to do profitable renovations works out on paper prior to selling, any market growth in that time is a bonus.

Relying on market growth to fill the hole left by the renovation costs is not a fun space to be in.

Unless you are a builder, most profitable renovations tend to be of a cosmetic nature. Profitable renovations that involve DA’s and structural works are best left to the experts.

 

Managing the sale – Key indicators to watch during your campaign

The key indicators to watch during your campaign

During the sales campaign of your property, the agent will more than likely have to make some recommendations. Whether these recommendations relate to the marketing, the price or whether to accept or reject an offer, their significance cannot be understated. On average most people sell real estate every 7 or 8 years.

Being so relatively inexperienced in such an important transaction can be daunting. If you are aware of the key indicators that govern every transaction, it will assist you in determining the merit of your agent’s recommendation. Agents are not always in the luxurious position of being able to tell their clients what they want to hear. However, by schooling yourself on the key ‘on market’ indicators, you can objectively assess any recommendations as opposed to emotionally reacting. If you can remain calm and objective during the campaign, it will be of great assistance to you and your agent in delivering the best possible result.

There are four indicators that interlock with most campaigns:

Internet Hits/Traffic

Enquiries

Inspections

Offers

Every vendor wants to be at the point where offers are coming in, as quickly as possible in the campaign. But offers are less likely to be made by buyers if the preceding 3 indicators are not aligning.

Internet Hits/Traffic

In the days of newspapers, home owners would spend excessive amounts of money and have little to no idea of the impact of the expenditure.

Now, with websites being the dominant marketing tool, web traffic on each property on every day can be tracked in finite detail. Trends emerge to assist the agent and the seller as to the progress of the sale. Ensuring that your property is well presented and priced accurately will ensure web traffic is strong from the start.

Ensuring that your property is photographed well and priced to appeal to fair minded buyers is far more important than an expensive web ad on ‘page 1’. Effective use of database mining, the Internet and email alerts will see website traffic on your home peak in the first 14 to 21 days of the campaign.

There is an old advertising maxim that says, ‘good advertising kills a bad product, faster’. This statement predates the Internet but it certainly applies to advertising a house on the Internet. It is crucial that your home is priced accurately and presented well online on day 1 of the campaign.

You don’t get a second chance to make a first impression with buyers. Given the web traffic peaks early in the campaign it’s a preference and desire that enquiries, inspections and offers follow whilst the property is still fresh to market and in play. If you are on the market for 21 days or more, you will notice that your web traffic begins to tail off. This is not a preferred outcome but it certainly does not spell disaster either, particularly if you have a unique property or it’s a slowing market.

Enquiries

Good web marketing will instantly lead to further interest and questions from prospective buyers. It is crucial that all of these enquiries are recorded in date order to compare with the web traffic and inspection numbers for the same period. Attempting to send buyers straight from the web marketing to the ‘open for inspection’, can create disengagement from buyers.

One of buyers’ greatest gripes is being unable to speak with an agent about a respective property prior or just after the inspection. Ensure your agent is speaking with prospective buyers who enquire before and after inspections. An agent who says ‘just come along to the inspection’ is likely to have too many questions from too many buyers at one time. People that pick up the phone and enquire with the agent are serious.

Inspections

It is easy to fill a house that is on the market with a lot of people. But unless those people are active buyers in the market, their presence and feedback may not be worthwhile.

A good indicator that you are reaching the target market is a buyer that has just bid on other properties or is about too. This tells you and the agent that they are genuine and serious about buying. The buyer’s feedback is plausible too. You may not necessarily agree with it, but you can concede they have a plausible point of view. The genuine feedback from fair minded buyers should not be mistaken for the bargain hunter. The bargain hunter highlights every minor fault yet has reluctantly decided to make an offer, 40% below the list price! In summary, don’t judge the quantity of buyers at inspections, judge the quality.

Ignore all feedback from non-buyers and neighbours. Look for trends in buyer feedback. What do buyers like and what are they resisting? If the only feedback you are getting from your agent is negative, you are probably being conditioned, rather than receiving feedback. If you have priced accurately, the agent has engaged and followed up on all enquiries and the best buyers have inspected your home within the first few weeks, you are likely to move to the offer stage.

Offers

The more buyers that engage with your home and submit offers, the stronger your position in the ensuing negotiation. And vice versa. The key to getting a lot of strong offers early is to ensure that all of the preceding three market indicators are leading the sale towards a natural conclusion. Once the offers begin rolling in, it is in the agent’s hands to deliver the best possible result.

Disconnect

If any of the above indicators falls away, it suggests that something may need to be reviewed. The key areas to look into are marketing, agent, price, market conditions and the presentation of the home. The agent has some control of these keys areas, and so does the seller. When the sale does not unfold as hoped, this is where trust comes into play between seller and agent. The seller may feel the marketing is not effective and the agent feels the price is deterring buyers.

As the seller, if you methodically and pragmatically review the campaign through the prism of the 4 on market indicators, the answer will emerge.

 

Underquoting – Sellers risk being snagged by bait pricing

As the boom fades, the damage and pain caused by underquoting has shifted from buyers to sellers.

In a boom, a low price guide attracts an excess of bidders who all compete vigorously for the home.The sellers end up with a satisfactory price, one buyer gets the home and there are many devastated buyers who line up to have another go next weekend.

What happens when the price guide doesn’t attract the promised crowd of bidders? The pain of under quoting is transferred to the seller. When a low price guide fails to attract the masses, the sellers face the ghastly scenario where they publicly pass in for a previously unimagined low price. Any chance of a high price is destroyed if your home passes in for a low price.

To fully understand how this can play out, take the campaign of a townhouse in Lilyfield. It was marketed in late 2015 for $1.6 million but remained unsold as Christmas rolled in. The property was rested and turned-up in the New Year with an auction date and new price guide of $1.4 million.

On auction day, the new price failed to ignite the buyers’ interest, as it was turned in for just over $1.4 million.On the following Monday, after the auction, the property went back on the market for just shy of $1.6 million.

This unsightly fluctuation in price is recorded against the property advertised history for all time, possibly unbeknown to the owner.  A failed campaign creates a damning digital footprint for a property that can haunt the current and any future sales campaigns.

When a property is put through the wringer, like the Lilyfield townhouse example, the sellers can still achieve a good price, if luck goes their way. But it certainly makes it harder than necessary.

As the boom turns into normal trading conditions, its crucial to remember that the stats don’t always tell the full story. Statistically speaking, prices are holding.However, there are fewer bidders per property in the current market than there were in 2015.

If you allow your property to be advertised for a low price on the promise that it will fuel buyer competition, be warned it doesn’t always go to plan. And when it doesn’t, the results can be devastating. During a boom, a sale was assured for the vendor. It was simply degrees of success. Now that the easy money has tightened up, employing the right agent, with the right selling and pricing strategy, is required to achieve full market value.

An auction that stops well below the reserve price in front of hundreds of spectators (and buyers) is the surest way to destroy the value of your home. Why would the agent advertise below the reserve price?Agents advertise properties below the reserve price because they know that the vendor’s reserve price is above market price.

Instead of being honest and highlighting to the owners that their expectations are ‘ambitious’, they under-quote to attract buyers to the auction. When the bidding stops below the reserve price, the agents will often pressure the owner to drop the reserve price to meet the market.

Some owners can see through this low-rank sales tactic and others succumb to the pressure on the day.All sales people know that the client can say one hundred times, but they only need to get a yes once to get a sale.

If you allow an agent to promote your home below the reserve price, beware, they may also pressure you to sell below your reserve price. Accurate evidence-based pricing is required in the current market to attract the right buyers to your home.

The right buyers are people prepared to pay a good price for the right home. Sellers who attempt to bait buyers with a bargain price may get exactly what they asked for – a bargain price.