Monday, 2 December 2013
It’s that time of year again, where all of the promises we make to ourselves about how much we will eat (or drink) are forgotten, where busy families re-unite for a traditional roast meal on a scorching hot summer’s day and celebrate Christmas. What a fantastic time of year it is and probably the right time for most of us to remind ourselves just how lucky we are to live in this beautiful city.
Since starting my real estate career in 1999 this has been one of the most extraordinary years I have seen in the domestic property market. In December 2012, the property market was soft, average times on market were prolonged, clearance rates were hovering around 45% and the overall sentiment was negative.
What a difference a year makes…
2013 has seen the property market roar back to life. Self-managed super funds, overseas buyers and record low interest rates have helped to fuel a boom with new price levels being tested and an average clearance rate of around 80%.
Apart from fundamentals, it has to be said that there is something in the Australian psyche about the desire to own your own home and an un-waivering belief that property will always go up in the long term. The one thing I have heard all year is people saying ‘if you are going to live in it for a long time, don’t worry too much about the price.’
If you believe what’s in the media, 2014 promises to be another big year for real estate. SQM’s Louis Christopher has forecasted 15-20% gains for Sydney; and St George banks CEO George Frazis recently commented on prices saying ‘you have got to remember we’ve had 10 years of very subdued activity, particularly in NSW, so theres a lot of catch up occurring.’
One thing this year has proven is that predicting the future is impossible. But isn’t it nice to be heading into the season where friends and family take front seat and predictions on property prices fade into the background.
On a personal note I would like to thank all of my friends, family and clients for their support this year and wish everyone a very Merry Christmas and a safe and happy new year in 2014.
Monday, 14 October 2013
When you list your home for sale or auction it makes perfect sense to display a price guide. Recent research from realestate.com.au has indicated that properties with a price guide receive 66% more views than properties without. This data is quite consistent from surveys done years ago in the newspapers which suggested that if you had no price guide, you could lose 50% of the buyer enquiry on your property (yes…buyers used to look for properties in the newspaper).
So why do so many properties get listed without a price guide? Some agents suggest that listing without a price allows the market to determine the value. In my experience, this strategy often leads to inconclusive open homes with a lot of the wrong buyers coming. Many sellers are reluctant to list with a price because they don’t want to limit what they could get. This is a fair point, however if you have a price indication you are ensuring that the people that turn up on Saturday are the right buyers (ie can afford the property) and have some idea of what you are looking for. And you can always update the price guide if necessary.
Common sense is often elusive in real estate. When you sell, it’s basically a process of price discovery – if you do not attract interest with a price guide then you have a very clear market reaction. On the other hand, if you have multiple interested buyers then you also have a clear market reaction. The strategy from there is up to you and your agent.
One warning that should be heeded is to avoid over pricing your property. I would go as far to say that the only thing worse than no price is a price that is too high. Why? When your property hits the market it is worth the most in the first few weeks of listing; it’s fresh and all of the best buyers want to see it. If you list at too high a price you may repel the best buyers and have to lower the price – clearly this will send a negative signal and potentially attract buyers looking for a ‘bargain’.
The other thing to consider in the digital age is your digital footprint. In his recent (excellent) book ‘Real Estate Uncovered’ property writer Peter O’Malley refers to the importance of being aware of your digital footprint. The internet never forgets and potential buyers are likely to google your property – if they see it’s been for sale for a while at different price points this will certainly weaken your negotiating position.
Ask yourself when you are looking to buy, which properties do you pay most attention to? A major law of marketing is to make your product easy to buy, this seems like common sense to me.
Sunday, 15 September 2013
By definition getting ‘gazumped’ means when you have a verbal agreement with a seller of a property, another buyer then offers more and then you are informed that the property has been sold. You have not been given the chance to match or better the offer, gazumped. Heartbreaking.
According to research the average home buyer searches for approx 85 days before signing on the dotted line. Saturdays are ruined with frustration, traffic jams and false advertising. The amount of time and money that is wasted is on searching for property simply staggering.
When you actually find the right home the feeling is indescribable. It really stuck with me when recently a client of ours said to me ‘the moment I walked in the door I just knew this was my new home, after 6 months of looking I knew immediately.’
If finding the right home is a great feeling then being gazumped is the absolute opposite. Admittedly, agents often deal with buyers without remorse but the fact is at the moment it’s a sellers market and as a buyer you are very vulnerable.
Until the contract is physically exchanged the property is on the public market. A verbal agreement is not legally binding and until exchange both you and the seller can pull out of the deal without penalty. Sometimes just before exchange buyers find a better home at a better price and change their minds, equally sometimes sellers get made a last minute offer that is much better and have the right to take it.
An ethical agent (and seller) will normally give the original buyer the opportunity to match or better the new offer but this often doesn’t happen. This is a critical point, if another buyer makes a better offer and you are given the chance to match it and you refuse – you haven’t been gazumped, you have been out bid. Its easy to slam the owners for reneging on a deal but ask yourself what you would do if you were about to sell for $1.1Million and then you were offered another $50,000?
By law estate agents must submit all offers to their clients and for some mystical reason whenever a property is close to being sold more buyers seem to come out of the woodwork. Recently we had a large prestigious home for sale for 5 months with no interest, finally a buyer showed up…2 days later another appeared and suddenly it was a heated battle to secure the property.
So what’s the solution? Be prepared, have your finances in order and when you see the home you want don’t haggle too much. I know dozens of people that regret missing the right property over a few thousand dollars and very few that regret paying a premium for their dream home.
Sunday, 18 August 2013
Earlier in the year I saw the property writer Terry Ryder speak at a training conference and he openly declared to the audience that house prices were about to rise, I have to admit I didn’t believe him. Ryder spoke of a rise in residential rents and sales activity, an increase in investment loan applications and a general improvement in sentiment and so on….it turns out he was 100% right.
There is no doubt that the freight train that is the Sydney property market has been on the move this year and prices in many areas have sky rocketed. I have been selling property for over 15 years and the current climate reminds me of mid 2003 when the market was on fire (late 2003 was very different).
High auction clearance rates, packed open houses and lightning fast sales are all hallmarks of a white hot property market…hang on…I’m a bit confused?
On one hand we read that the Australian economy is in a precarious position and on the other property prices are soaring?! China is slowing down meaning the faster part of our 2 speed economy is in danger. Shouldn’t this mean we should all be a little cautious?
The bulls say that there is a shortage of property and new housing and as a result prices will continue to rise. The bears on the other hand point to housing affordability in comparison to global markets and point out how far prices could fall here.
One thing is certain, predicting what will happen in the future is impossible but in my humble opinion I think we should all be a little bit careful. Low interest rates are tempting buyers into the market but my guess is that they won’t be at record lows forever. I’m certainly no economist but if the job market is softening, China is slowing and rates have never been lower you should have a good think before you sign on the dotted line.
There is never a bad time to buy a family home that you can afford but affording it means factoring in that things will change, that’s one prediction that I am happy to make.
Wednesday, 19 June 2013
If you were going to buy a car, you wouldn’t dream of handing over the money before you took it for a drive…so why wouldn’t you test a real estate agent before you hired them?
It is often estimated that the difference between a good agent and a bad agent can be the difference of 5-10% on your sale price, if you look at the average cost of property in Sydney then that’s a huge difference to what may or may not get.
How do you ‘test drive’ an agent? How do you really know who your hiring? Sure, when the agent came in to meet you they were charming, said hi to the kids, patted the dog and made you feel wonderful about your home but is this really the same person that is going to be talking to the potential buyers when you are not there?
How do you find out? Easy…before you choose an agent just pretend you are a buyer. It stands to reason that a good selling agent will be good to buyers, they will follow up and point out positives for the properties they are selling. Believe it or not, a lot of agents don’t even call the buyers that come through your open house…fact.
Before even inviting an agent to discuss your home or investment property call a few agents and ask them about a property they are selling – its crucial that you don’t tell them that you are a potential seller! Ask questions like ‘why are the owners selling?’ How much is it? And perhaps the best one of all ‘what do you think they would take?.’ Just by asking these simple questions you will really get a feel for what kind of agent they are. Many agents will say things like they have bought another house, they have to sell, it’s a divorce, the price is a probably a bit high etc etc…..at this stage alarm bells should start ringing.
After you have narrowed down to 2 or 3 agents that pass the above test, go and visit an open house, assess how the property is presented, how the agent is presented and then simply wait…did they call you back?
Warning this type of mystery shopping may shock you, so be prepared.
Thursday, 23 May 2013
Most of the articles we have written in the past have been focused on helping people who want to sell. That’s probably no accident as real estate agents (myself included) are obsessed about helping and finding sellers.
This month I wanted to write something that focused on arguably the most mistreated and neglected creature in the real estate market – the buyer.
If you are a buyer out there in today’s market, I don’t envy you. The market is white hot, agents are back to boom time attitudes and it’s almost impossible to work out what a property is worth let alone what it looks like in real life (thanks to wide angle lenses).
Let’s face it – it’s a sellers’ market, and unfortunately if you’re a buyer, that makes life pretty tough. So where do we start?
Firstly, if you are looking to buy a home or an investment property – research is paramount. In my view, the best thing you can do is choose an area and get to know it inside out. It’s very difficult, and can be a disservice, to compare apartments in Kirribilli to houses in Killarney Heights – it will just confuse you. Find out what key attributes affect values; for example, being close to the train station in Waverton is as important as being near a ferry wharf in Neutral Bay. Researching a specific area will empower you to make a quick buying decision when you find the right property – and believe me, in this market you have to be quick.
Secondly, get ready before you start looking. Ensure your finances are in order and have a good conveyancer and/or solicitor ready to go. The best buyers get the best properties and that’s because they are ready. It’s no secret that sellers and agents won’t wait if there is a ‘bird in the hand.’
Finally, get realistic. Often people talk about sellers being unrealistic but there are a lot of buyers walking around week in and week out looking for a property at a price that doesn’t exist in the current market. Subscribe to house price reports, keep track of recent sales, and I’m sad to say this but be skeptical about what selling agents say with price guides. If it sounds too cheap to be true, then it probably is.
If you look in a specific area and a particular price range, it won’t be long before you are very familiar with that part of the market. And if you know your stuff and are ready to buy you will invariably save yourself months of heartache and hard earned savings (eg you won’t be spending money doing due diligence on properties that you can’t afford).
A final word: be patient and be prepared to pay a good price for a good property – if you don’t someone else will!
Thursday, 25 April 2013
One question we are commonly asked by clients is ‘how much should we spend on the house before we sell?.’
Obviously every case is different but generally speaking people need to be very careful with this as we often see thousands sometimes tens of thousands of dollars wasted on pre-sale renovations.
In my experience there are 2 types of properties that attract alot of interest and get high prices in Sydney, renovated homes and un-renovated homes.
If you own a classic period home on a good street that hasn’t had any work done to it in decades chances are you are going to have hordes of interested young couples that have watched television shows like ‘The Block’ and they will be champing at the bit to create their own dream home. Suffice to say many of these young couples have never been through a renovation and often have no idea of the cost both in time & money a renovation requires. All of this amounts to potential packed homes selling for top dollar in the current market.
On the other hand a recently renovated home with all of the ‘bells & whistles’ will attract buyers (many of whom who have renovated before!) that will pay a premium for a completed product. The catch here is that Sydney-siders will pay handsomely for quality but will turn their nose up at cheap renovations, good properties get good prices.
There is a third type of property and that is the ‘in-betweener.’ These properties have often had bits & pieces done over time, maybe an extension in the 70’s, a pool in the 80’s, a bathroom in the 90’s and so on. Its this category where people have to be careful. If your home is like many Australian homes that is a patchwork of renovations and you want to sell be extremely careful before you spend vast sums of money on modernising the property.
The fundamentals have changed with time for example open plan is in, formal dining is out. If your property has a dated floor-plan then spending $30,000 on a new kitchen could be a complete waste of money. Our office once sold a house in the prestigious harbourside suburb of Clifton Gardens and the owners insisted on replacing the kitchen before sale. The purchaser was a young cashed (or perhaps mortgaged) up executive who had grand renovation plans…..1 week after settlement the former owners drove past and there was most of the kitchen – on the nature strip.
When you go to sell your home, presentation is key but that doesnt mean renovation. Focus on making your home welcoming & make sure it sparkles. Tidy up the front garden, plant some flowers, consider painting, lose the heavy old curtains that prevent natural light from coming into your home and clean those windows!
You will be surprised by what clever tidying up will do to the impression that your home makes rather than trying to guess what the next generation wants in their kitchen.
Monday, 25 March 2013
Before a real estate agent can show prospective purchasers (legally) through your home there are two pieces of paperwork that you need to have in place. The first is a contract of sale, which is normally prepared by a solicitor or conveyancer – on rare occasions people opt to do their own legal work (it was Lincoln who famously said ‘He who represents himself has a fool for a client!’).
The second piece of paperwork is called an agency agreement. These agreements confirm the terms under which your agent has been appointed and legally authorize the agent to perform duties on your behalf.
But be warned. These agency agreements are designed solely for the protection of the agent, not you.
In real estate, it’s all about getting the listing. If you work as a selling agent you simply have to get listings or you will not survive. The Sydney market is one of the best in the world so it stands to reason that if you can find and secure stock (ie properties) you will make sales. Not surprisingly, the competition amongst agents for listings is fierce.
What many sellers don’t realise is that the agreement you sign with an agent is a very powerful document. And surprisingly, many people don’t read the whole document – until it’s too late. On one hand, I’m not surprised that this happens as an average agency agreement is about four pages in small print. However, you simply must know what you are signing before you sign it!
What can go wrong? Plenty. We regularly meet consumers that signed an agreement with an agent without realising that even if their property didn’t sell they would be slugged for thousands of dollars in expenses. We also meet people who sign agreements with agents that have exclusive periods (ie only that particular agent is permitted to sell the property) that exceed four months. Which raises the obvious question: if an agent is promising you that they already have buyers and will sell your house in two weeks, why on earth are they asking you to sign a 16 week agreement?
A very well known ‘premium’ franchise signs people up from 30 days prior to the auction and then 90 days after the auction. Why? Why do they need 90 days after the auction if they’re so confident that it will sell either prior to or at the auction? Very good question…and this is where it gets interesting or sinister – depending on how you are looking at it.
No matter what you have been promised by the agent prior to signing the agreement – once you have signed the agreement, you are trapped. It’s very common to hear people say the agent was great and then the minute they signed, things changed and the agent started talking the price down.
It’s worth asking your agent if they’d be prepared to add a dismissal clause to the agreement – stating that if you, the seller, are not happy with the service, the agent will cancel the agreement within three days of being notified in writing. If they are not prepared to add the clause, then you have to ask yourself why not?
When you sign with an agent, the high point of the relationship shouldn’t be when they get your signature, but rather when contracts are exchanged for a price you’re delighted with.
Monday, 18 February 2013
According to wikipidia ‘The endowment effect is the hypothesis that a person’s willingness to accept compensation for a good is greater than their willing to pay for it once their property right has been established.’ In the world of real estate this means we all think our home is worth more than it really is.
Given that I have been selling real estate for well over a decade, I expected that I would be immune to this phenomenon. However, as the last coat of paint is rolled onto the walls of my own home, I find myself day dreaming at what the property may now be worth (despite the fact it was bought at the height of the boom and our original renovation budget has doubled).
When it comes to our homes, the endowment effect costs average Australians millions of dollars a year in squandered opportunities. Our homes are normally our biggest assets and we are emotionally attached to them. It’s impossible to be objective about the market value of a place where you watch your children take their first steps or where you bowled Dad out in that legendary game of back yard cricket.
Combine this with a market where more and more real estate agents than ever are competing for less and less sales, and you have a recipe for disaster.
Most people call in three agents and ask one simple question: ‘what is it worth?’ Knowing their answer will affect their chance of getting the listing, the agents normally give the owners an ‘optimistic assessment’, ham up how many perfect buyers they have on their books, and before the house even hits the market they’ve painted the scene for a fever pitch auction.
At this stage most people go on the market and their ability to recognize a good offer is all but gone – and who can blame them? But the worst is yet to come…
Your property is likely to be worth the most the first day it is put on the market. The best buyers spot it quickly and turn up immediately – these buyers are ready and if it’s what they are looking for, they will pounce. As the seller, you are in a very strong negotiating position – you own the product and it’s brand new to the market.
This is where the disaster normally unfolds – the overconfident seller meets the best buyers in the market and rejects their early offers. The expectation is that next week there will be even more but in most cases the next week there are less. Ask friends and you will find this happens all the time.
The greatest challenge that home sellers across the globe face is finding out how much their beloved home is worth before putting it on the public market.
So how do you find out? Either call an independent valuer before you select an agent, or when interviewing agents ask them to propose a sliding scale on their commission – going from best case to worst case.
A sliding scale will reveal to you where the agent really thinks the house will sell and this is exactly what you need to know before you start.