Realestatements

STUCK WITH THE WRONG AGENT

Insist on a short agreement period and watch out for the agents that trick you into signing an everlasting agreement.

Auction, tender and private treaty are all forms of exclusive listing agreements. These agreements engage an agent to sell a property in exchange for a fee. An exclusive agreement can last three months or even longer. Exclusive listing agreements are part of the real estate landscape.

An exclusive listing agreement compels the seller to pay the listing agent when the property sells, regardless of who sells the property.

Good agents invest significant amounts of time, energy and financial resources working to sell a property. They need the security of payment upon sale to commit these resources, a reasonable premise upon which to work. Exclusive agreements provide this security.

However, exclusive agreements often tie up the people they are supposed to be helping. The seller.

If a seller signs an exclusive listing agreement with an incompetent agent, they are stuck.

Many agents fail to fulfil their duty to the seller. They overprice a property to get the listing, and then disappear. The seller hears little feedback from the agent, sometimes nothing. The property is merely launched onto the internet and the agent sits back and hopes for a sale. The sellers are simply ignored.

There is an easy and effective method to avoid the danger of an exclusive listing agreement.

Insist any agent you hire provide a dismissal guarantee.

If you are unhappy with the agent, allow them seven days to resolve the problem. If it remains unresolved, you can dismiss the agent immediately.

If an agent is not prepared to guarantee their services, you should not employ them.

It is an unfortunate truth that sellers should never accept an agent promises at face value.

Good agents invest significant amounts of time, energy and financial resources working to sell a property.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

SHORT OF FULL DISCLOSURE

If an agent is prepared to lie for you they are prepared to lie to you.

In 2001, Sef Gonzales murdered his family in their home. In 2004, that family home was sold to buyers oblivious of its gruesome history. Once discovered, the buyers refused to proceed to settlement. After massive bad publicity, the agent, aware of the property’s history from the start, was forced to refund the deposit. The property was eventually sold to a different buyer for a substantially lower price.

Under legislation, sellers are required to disclose any relevant matters that may affect title. But that doesn’t cover a property’s history, such as the above. However, if a buyer feels they have been misled when purchasing a property, such as non-disclosure of ‘material facts’, a court could certainly set aside any contract and award damages to the purchasers.

The current test of a ‘material fact’ is whether disclosure would have prevented the buyer from purchasing the property.

Non-disclosure of a known issue is at times very tempting. Hiding it often seems like an easy solution. However, this can quickly grow into a problem, often significantly larger than the original issue.

When selling a property, full disclosure of all potential problems prevents the inevitable discovery of the issue, whether major or minor. For instance, the chances of concealing termite damage from a pest inspector are no better than concealing a history of murder.

A seller asking an agent to conceal facts regarding a property is in essence asking the agent to lie. Yes, agents are employed to act on behalf of the seller, but it is hard to think of a situation where lying on their behalf is in the seller’s or the agents interest.

If an agent is prepared to lie to others, its not hard to imagine the agent will also lie to the seller. Regardless, if the parties involved in a property sale lie, they are most often found out.

A simple rule of thumb: if in doubt – disclose. All issues are easier to negotiate if disclosed up front.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

THE ENDOWMENT EFFECT! 

Try not to get too emotionally involved!

The endowment effect can have a significant impact on a seller’s initial asking price.

Unlike an agent, an independent valuer does not stand to gain financially from an inflated price.

The endowment effect is a well-known economic hypothesis where people ascribe more value to things merely because they own them. The stronger the personal and emotional connection, the higher is the perceived value.

Owning a home is very personal and emotional experience. Strong connections can form between individuals and their houses. As a family grows, intensely personal experiences turn a house into a family home and the emotional connection continues to grow.

Harvard professor of business, Dr Max Bazerman (1999), suggests that home sellers may be particularly affected by the endowment effect, which manifests in an increased initial asking price. Dr Bazerman explains that sellers may reject early offers around market value, only to later come to regret that decision as the reality of the true market price sinks in.

Sellers who think they may be prone to the endowment effect should seek out an unbiased assessment from a knowledgeable but disinterested third party.

Unlike an agent, an independent valuer does not stand to gain financially from an inflated price, and unlike the seller, there is no emotional attachment or ownership of the property. They can provide a true disinterested valuation.

A seller can assess the price they receive from a valuer against their trusted agents market analysis of recently sold properties. This information can then be used to establish a likely market value, along with a marketing and price strategy.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

WAITING FOR THE MARKET TO IMPROVE

Will my life improve from a sale now?

Why not sell the house you don’t want and buy the house you do want and wait for it to go up in value.

The real estate market is not a single entity.

It is million of people making individual decisions based on their personal needs and opinions. Current real estate trends vary wildly from state to state, city to city and even suburb to suburb, making the real estate market virtually impossible to predict with any accuracy.

When deciding to sell, many use their personal opinion of the real estate market as the basis for that decision. The chance to make a few thousand dollars more will often keep people in a property they should sell. They wait in the hope their property will rise to a value that the financial gain makes the move worthwhile.

The mechanism to pick the top of a market is elusive. How is it known the market has peaked? Because, quite simply, it starts to fall. By definition, the top of the market has been missed. A rising market can quickly become a falling market.

The danger comes in trying to predict the market. Neither a rising, nor a falling market is a bad thing; it is just the market. Based on individual needs, the right time to sell may be in either.

The key question that needs to be asked before any sale is, ‘How will my life improve as a result of this sale?’ if there is no definite answer, the move should be reconsidered.

Price shouldn’t be a seller’s primary consideration if selling and buying in the same market. Changeover cost is the key consideration. If the selling price does rise, most likely the purchase price will also rise.

When seeking to reduce debt, consideration must be given to decreased interest bills and the reduction in personal stress associated with the debt. Does waiting for improved market conditions, the cost of losing the opportunity may be greater than the increase in the value of the property.

Living in the desired house rather than remaining stationary, experiencing less stress thanks to reduced dept, and taking advantages of opportunities rather than missing out are three excellent reasons for selling now rather than waiting and thinking about how life might improve.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Andrew Trim

SELLING WITH A TENANT

Property investors are rich!

This is an assumption many people make, and it is frequently wrong. Most property investors are not wealthy. They often experience hardship in the pursuit of a secure future for themselves and their families.

The reality of residential property investment is a tale of everyday people having a go. Most property investors are normal people with average salaries. Sometimes things go wrong, employment or business opportunities change, tenants get in arrears and properties always need maintenance.

If circumstances dictate an owner needs to sell with a tenant in place, certain dangers must be addressed.

Firstly, if a sale is on the horizon and finances are tight most banks are negotiable when it comes to suspension or minimisation of repayments while waiting to sell.

Secondly, check the lease. A periodic lease can be terminated with the correct notice at any time. A fixed-term lease is more problematic.

A fixed term entitles the tenant to stay until the end date of the lease, regardless of the ownership. This narrows the field down to a buyer being prepared to inherit the tenancy – most likely, an investor. Any time the buyer field is narrowed, the selling price is liable to be lower.

Through effective negotiation, tenants may agree to move out. Compensation such as moving costs or a cash incentive may help.

A good tenant caring for the property assists when selling. Compensation such as a reduced rent is a gesture of goodwill that is more often than not repaid with a supportive tenant.

A rogue tenant can make a property very difficult to sell. Presentation will be sub-standard and inspections difficult. Buyers often don’t give a property like this the same consideration they would to a vacant property.

Depending on circumstances, it may be best to give notice and wait for the lease to expire or have the rogue tenants removed for breach of tenancy. Once the tenant vacates, the property can be restored to a saleable standard through some hard work and repairs as necessary.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Andrew Trim

7 QUESTIONS TO ASK AN AGENT

Don’t sign anything with an agent until you ask these very important questions!

Taking the time to understand and ask seven questions before you sign with any agent can go a long way to ensuring you make the right choice.

  1. What evidence did you rely on when valuing our property?

We are all susceptible to believing what we want to hear. If an agent quotes a high price for your property, its natural to want to believe them. However, an agent who cannot justify their price to you as the owner will have an even harder time convincing a buyer.

  1. If the property sells below your quoted price, do we still have to pay full commission?

When you sign an agency agreement to sell, the agent must provide a written assessment of value. You, as the seller, enter into the agreement based in part on the agents written assessment. If the agent fails to achieve their promised assessment of value, you should have an ability to penalise the agent for getting it wrong. By being firm on this point when interviewing agents, you will flush out what the agent really thinks your home is worth.

  1. How do you have an auction with one buyer?

It is staggering how many homeowners list for auction without knowing the answer to this question. Clearly, auctions rely on competition – that is, multiple bidders.

Unique homes often require unique buyers. In soft markets, you can be fortunate to have even one buyer. What happens if only one buyer attends the auction?

What if two buyers attend the auction, where one absolutely loves the home and the other is a bargain hunter? The bargain hunter sets the price at which the emotional buyer becomes the highest bidder.

Resist signing with an agent until the offer is plausible explanation on how they handle a situation where they have only one buyer at the auction.

  1. What strategy will you employ to get the highest price for our property?

Agents love to talk about ‘clearance rates’ when selling and marketing their firm. As a home seller, you want a high price, not to be apart of an agents clearance results. Focus on the agent with the best strategy for achieving the highest price, not for clearing housing stock quickly.

The time to ask tough questions about the agents strategy is before you employ them. The agent is less able to wave you away if you grill them prior to listing. After all, you will be paying a lot of money for the agents service, so its best everyone is on the same page before you begin.

  1. If you already have buyers, why do we need to pay advertising upfront to reach those same buyers?

It’s the greatest paradox in the market. The agent claims to have readily available buyers, and then ask for advertising money to find buyers. Why?

  1. Which agent will attend the inspections with buyers?

Many lead agents will list the property and then palm off the selling of the property to a junior or assistant. Get it in writing that the agent you list with will be the agent handling inspections and negotiations. You don’t want the sale of your home to be treated as a training exercise. In fairness, its not that junior salesperson wont be involved in the process, but you need to be completely clear about the experience of the agent who will be leading negotiations in the campaign.

  1. Can we have the names and contact numbers of 10 previous clients?

Real estate agents sell houses to buyers and services to sellers. The house is tangible, but the service is intangible. Judging the value of any service in advanced of actually receiving the service is difficult. Speak to the agents recent clients to understand whether the promises match the delivery.

Ask the hard questions first, before you sign. Saving the tough questions until later, when the campaign is in trouble, is too late.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Peter O’Malley

THE BEST BUYERS COME QUICK

Many home sellers have learned that when you list a property in the digital age, the buyers are coming, ready or not. With the internet, real estate marketing has become close to instant. Within days of it being listed online, literally thousands of potential buyers have run their eye over your property.

In most campaigns, 75 per cent of the enquiries and inspections will occur in the first 21 days. If you decline the highest offer made during this period, you are essentially working in the belief that the best buyer will be in the 25 per cent that enquiries and inspects after day 21 of the campaign. In fairness, that could sometimes be the case.

Its imperative to know the probability you are relying on when you decline an early offer. As a general rule, it is safe to decline an early offer that does not meet your or the agents price expectations. However, declining a strong offer just because its early in the campaign can, and often does, backfire.

Even in a strong market nearly 30 per cent of properties listed for auction are sold prior to the big day. This is because the best buyers turn up early, bid strongly and move on if their offer is declined.

In making a case for why the early offer should be judged on the price, rather than the timing, there is one aspect that cant be predicted. That aspect is context. Every sale has a different dynamic. Knowing the rules of poker is different from being able to play poker.

Whether or not the early offer is played to the seller’s advantage is best judged in context. A skilled agent who can actually negotiate will ensure he decision is made in the client’s best interests.

An offer that’s early from the seller’s perspective is often one made after months of arduous searching by the buyer. This disconnect in timing derails many campaigns because the best buyer is sent packing.

Declining a strong offer just because its early in the campaign can backfire.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Peter O’Malley

WHAT IS A DIGITAL FOOTPRINT & IS IT DANGEROUS

A digital footprint is like a pseudo credit rating for your property.

Any advertised price is on record for all time. Every property now has a digital footprint and buyers can easily access its advertised history. If your home is overpriced and unsold after a lengthy sales campaign, educated buyers have been gifted information that’s critical in the negotiation process.

Any fluctuation in price, taking the property off the market for 6 months until the market improves or comes up to your price creates a damning digital footprint that can haunt current and future sales campaigns.

Once you have established fair market value, determine if it is acceptable to you. If not, it may be best not to list on the market at all. A failed campaign can haunt you in the future.

If the market price is one that allows a comfortable move, then list on the market for a price that is at or above fair market price. This sets up a win/win negotiation.

Fair market price often creates buyer competition. Sellers want to negotiate, but buyers want to buy. The smart way to attract the best buyers is to price accurately and fairly. This maximises the number of bidders for the property, ensuring a win for you and win for the buyers who are in competition against other buyers, rather than with an overpriced vendor. Buyers are more accepting of genuine buyer competition than they are of a vendor who is blatantly trying to ‘beat the market’.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Andrew Trim

ARE AUTOMATED ONLINE PROPERTY VALUATIONS RAISING MORE QUESTIONS THAN ANSWERS? ARE THEY JUST A MARKETING GIMMICK?

Just as the internet has increased the availability of data, it has also given rise to companies and organisations that offer automated real estate valuations. Just type in your property details and up pops a valuation, as if by magic. But before getting too excited, read the fine print; those who take the time to check will often find a disclaimer around the accuracy of that figure.

In the fine print some of these companies suggest there could be a variance in the final selling price of between 15 and 30 per cent. That’s a lot of variation, and basically an admission that their automated valuation service is nothing more than a gimmick.

However, many people see the headline number and accept it at face value.

Telling a buyer a property could sell for between $750,000 and $1 million wont do much to clarify the fair price debate.

Indeed, automated valuations are flawed on so many levels, it is difficult to know where to start in putting them into a proper context.

The valuation of real estate can be done accurately only by an experienced professional assessing each individual property on its merits. Data-generated valuations are prone to overlooking crucial aspects like renovations, improvements, aspect, standard of finish, presentation, defects and flaws, depth of buyer interest, sales that have not yet settled and the terms of sale.

If a buyer or seller takes an online valuation at face value, they are likely to make a mistake. A mistake they will come to recognise in time.

Let’s look at a classic example: Ivan and Lynn were leasing an apartment in a desirable waterfront complex. It was so appealing they began to think of buying in the development.

As luck would have it, while their interest was high, their landlord decided to sell. The property was listed at over $800,000. When Ivan and Lynn did their online research, they were provided with a report that valued the property at $696,000.

They duly based their offer on this report, thinking the landlord was guilty of gross overpricing. They could afford the landlord’s asking price, but they were concerned about overpaying, given what the automated valuation report had said.

The property sold in two weeks for well above $800,000. Ivan and Lynn were then faced with having to move out and confront the market reality.

Confusion can reign for sellers too. When three agents assess a property as being worth around $1 million, an online valuation that states the property is worth more can be confusing to the home seller: who has it wrong and how do you determine that?

Automated online property valuations raise more questions than answers. They are marketing gimmicks.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Peter O’Malley

TRICKS TO INCREASE VENDOR MOTIVATION

Most agents are trained to over promise on price to win the business then work the vendor down in price. This is called conditioning!

If you want an above-market price for your property, agents have a number of tricks to bring you back down to market price. Some agents employ subtle tactics, while others are more overt. Either way, when you know what they are, you stand a better chance of protecting yourself.

Here are the 5 best known methods used by agents to coerce a scale back in price.

The pre-auction low offer: If you are expecting a huge price on auction day, an offer well below your expected price often surfaces about a week before the auction. The agent does not expect the offer to be accepted. They just want you to second-guess your price expectations and feel grateful when the price exceeds the bargain hunters low ball offer.

Moving the tenants out: The more financially committed the vendor is during a campaign, the more likely they will accept the highest bid on the day. Encouraging tenants to vacate in the name of an ‘improved presentation’ increases the vendor’s financial exposure to the campaign.

Setting a deadline: Sellers are often encouraged to auction their property because the deadline (the auction date) can pressure buyers to act. However, as the deadline draws closer, the pressure of the situation shifts from the buyers to the seller. While buyers can wait for other properties to come onto the market, the seller is publicly exposed on auction day.

Don’t let a reported clearance rate of 80 per cent fool you into a false sense of security. Many properties are withdrawn or fail to sell at auction, so the ‘result’ conveniently goes unreported. It is well known among agents that the real clearance rate is always significantly lower than the figure advertised.

It is important to understand that the agents clearing a property and the vendors achieving the best possible price are two very separate outcomes.

Hiring furniture in: When an owner hires expensive designer furniture from a home staging company on a six-week contract, it creates both an expense and a deadline for the vendor.

Upselling advertising: As you have discovered, agents are addicted to Vendor Paid Advertising (VPA). They often tell each other in training courses that upfront VPA ensures they get a committed vendor from the start. ‘Premium package’ internet campaigns are designed to lighten vendors wallets. If an agent really believes in these advertising methods, ask them to carry the cost and risk of the strategy. You may find the agent can quickly deliver a buyer without either of you having to commit to a massive upfront expenditure.

The greatest losses often occur at the time of greatest gains. It’s a reality that vendors are resilient and careful when they market is flat, yet more relaxed and amendable to expenditure is boom markets. If you stay resilient and careful, you can be assured of the best possible net result.

Know the tactics agents use to pressure vendors before you engage any agent.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Peter O’Malley

PROTECTING YOURSELF FROM CONDITIONING

Here is the definition of conditioning:

A systematic process employed by real estate agents for communication bad or negative news to the vendors to drive down their price expectations, after the agent has received the listing.

Whether it is shortly after you have signed a listing agreement or when your property has remained unsold for a lengthy period of time, you are always susceptible to being conditioned. Protecting yourself from this should start before you employ an agent. If you are mid-campaign and your agent begins to condition you, it can be hard to extricate yourself from that agent, particularly if you have signed a lengthy agreement.

Conditioning is most easily identified in circumstances where the agent bombards you with negative news about your home, usually disguised as buyer feedback. You know you are being conditioned when the agent offers few solutions other then to ‘drop the price’.

To protect yourself from being conditioned by the agent, adopt the following strategies before you sign an agreement.

Only sign a short agency agreement. One of the most powerful tactics agents adopt to set up the conditioning of ‘overpriced vendors’ is trapping them into signing a lengthy listing agreement to begin with. If your motivation to sell is high and the listing agreement is long, the agent has all but secured a sale. If the agent has overpriced the home, they will spend the next couple of months whittling down the owner’s price expectations by giving them negative feedback about the property.

By signing an agency agreement with only a short exclusivity period, you can deliver the ultimate response to an agent who begins to condition you – you can fire them. It is your home and you are the boss. If you sign a short agency agreement, you maintain the power. If the agent insists on an agency agreement longer than 60 days, don’t hire them. There is no such thing as a ‘standard agreement’!

Before listing, ask your agent to outline the positive and negative features of your home, in writing. Then the agent can’t use any negatives listed against your property later as ‘new’ information, designed to coerce you to lower the price they originally gave. Ask the agent directly. ‘How do you propose to overcome those negatives during the sale?’ shortlist agents with the best responses to this question.

Select your agent based on strategy, not price. If your property is priced correctly, the agent wont have to condition you – they will be to busy negotiating with buyers. The reason agents have ‘overpriced vendors’ is that they overpriced the listing to begin with.

Unfortunately, many home sellers select their agent based on the selling price they quote. They inadvertently turn the agent selection processes into a bidding war. The main problem here is that it wont be an agent who buys your property.

If you select the agent with the best selling strategy, not the highest selling price quoted, your agent an avoid a bidding war when trying to impress you.

Many people become angry when they learn that conditioning is a low-rank, premeditated sales tactic. They are surprised and disappointed that their agent of choice has taken the conditioning path. The key to success is to insure yourself against conditioning before you employ an agent, rather than being exposed after giving them the listing.

Conditioning is a weapon commonly adopted by agents. Protect yourself in advance by insisting on a ‘get out’ clause in your agreement if you are being conditioned.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Peter O’Malley

READING THE PLAY TO MANAGE THE SALE

During the sales campaign, your agent will make some key recommendations relating to marketing, pricing, or whether to accept or reject an offer. These are significant watersheds in your campaign and their importance cannot be overstated.

As previously mentioned, most people sell real estate on average every seven or eight years. This inexperience in such an important transaction can be daunting. Being aware of the key indicators that govern every transaction will assist you in determining the merit of your agent’s recommendation.

Agents do not always have the luxury of being able to tell their clients what they want to hear. But by educating yourself on the key ‘on-market’ indicators, you can assess recommendations objectively rather than reacting emotionally.

If you can remain calm and objective during the campaign, it will help you and your agent to deliver the best possible result.

There are four indicators of the health of your campaign:

  1. Internet hits/traffic
  2. Enquiries
  3. Inspections
  4. 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 three indicators are not aligning.

  1. Internet hits/traffic: when newspapers reigned, homeowners would spend excessive amounts of money yet have no idea of the impact of this expenditure. Now online traffic running on each property every day can be tracked in infinite detail. Trends emerge to assist the agent and the seller as the campaign progresses

Ensuring your property is presented and priced accurately will ensure online traffic is strong from the star. Good photography and a price that will appeal to fair-minded buyers are far more important than an expensive advertising placement.

Effective use of database mining and email alerts will see the number of online visitors viewing your home peak in the first 14 to 21 days of the campaign.

The old advertising maxim, ‘good advertising kills a bad product, faster’ is important here. This adage predates the internet, but it certainly applies to online property advertising.

It is crucial your home is priced accurately and presented well online on day one of the campaign. You don’t get a second chance to make a first impression with buyers.

Given that online traffic peaks early in the campaign, it makes sense that enquiries, inspections and offers follow while the property is still fresh to market and in play.

After 21 days or more, you will notice the online traffic viewing you house begins to tail off. This is not a preferred outcome, but neither does it spell disaster, particularly if you have a unique property or the market is slowing.

  1. Enquiries: Good online marketing will lead to further interest and questions from prospective buyers. It is crucial that all 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 online marketing to the open for inspection can cause buyers to become disengaged. One of buyers greatest gripes is being unable to speak with an agent about a property before or just after the inspection. 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 who pick up the phone and enquire with the agent are serious.

  1. Inspections: It is easy to fill a house on the market with a lot of people. But unless those people are active buyers, their presence and feedback is unlikely to be worthwhile. A good indicator that you are reaching the target market is when there’s interaction with a buyer who has just bid on the other properties or is about to. This tells you and the agent they are serious about buying. Buyers feedback is useful too. You will not necessarily agree with it, but you can concede they have a legitimate point of view. Reasonable buyers who offer genuine feedback should not be mistaken for bargain hunters. The hunter highlights every minor fault yet reluctantly decides to make an offer, 40 per cent below the list price!

It is important to avoid judging inspections by the number of people who turn up. Ignore all feedback from non-buyers and neighbours. Looks 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 a cross-section of honest 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.

  1. Offers: The more buyers engage with and submit offers on your home, 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

A deficit in any of the four indicators outlined here suggests that something may need to be reviewed. The key areas to look into are marketing, the agent’s skills, pricing, market conditions and the presentation of the home.

The agent has some control of these keys areas, as does the seller. When the sale does not unfold as hoped, trust between seller and agent comes into play. The seller may feel the marketing is ineffective while the agent feels the price is deterring buyers. As the seller, if you methodically and pragmatically review the campaign through the prism of the four on-market indicators, the answer will emerge.

The on-market key performance indicators will help you assess the sales campaign. By doing so you are likely to have a more harmonious relationship with your agent.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Peter O’Malley

SHOULD I ACCEPT OR DECLINE AN OFFER?

Deciding whether to accept or decline an offer can be especially challenging for owners. There is no rulebook to follow on how to play the offer scenario when it arises. It all leads back to a simple question: how do we extract the best price without losing the buyer?

The answer, however, is complicated. There are no certainties in a real estate negotiation, but there are some principles that will help guide you through the process.

Market price: what does the recent sales evidence suggest? As the seller, you may have a target number in mind, but how does that number compare with comparable recent sales? Does the offer seem fair, high or low?

Once you have established this very simple rating of the offer at hand, you will have a clearer view on how to handle the negotiation. Never base your response to an offer on the asking price or price guides of other unsold listing. Always base your response to an offer on recent comparable sales.

The most painful offer to accept is the one that is lower than the offer you previously rejected. Remaining calm, logical and unemotional during a negotiation is crucial to making the right call.

Context: many sellers ask hypothetical questions before putting their home on the market. Questions such as ‘What should we do if someone offers $1 million?’ or ‘What do we do if we get an offer in the first week?’. Its natural that the seller poses such questions, but they can be answered only in the context of the campaign.

An offer should rarely be judged against time on market. The digital age has made marketing real estate an almost instant process. An offer should be judged against the feedback and interest of other potential buyers. If the first buyer on the first day makes an offer on your home, then yes, this can be a very tricky situation. Make no mistake, it quite often happens this way.

The bottom line is you cannot plan in advance on how to play the actual offer. The offer needs to be handled in the context of the campaign. This is where the success of the campaign will often rise or fall on the agent’s negotiating ability.

Format: there are three basic formats in which an offer can be made verbal, written and contractual. By law, real estate agents must disclose all offers to the sellers. When an offer is made, it’s worth remembering that verbal and written offers are non-binding. Only a signed contract with a deposit cheque can be considered truly genuine.

If you accept a verbal or written offer that crashes, its best to consider it a non-offer as you proceed, to avoid making mistakes when assessing future offers. Be wary of the high verbal offer – easy come, easy go!

Competition: if you are fortunate enough to have multiple buyers for your property, the whole equation becomes simpler. But before becoming complacent about having multiple buyers, satisfy yourself that they are genuine buyers. Declining a contract offer in favour of a non-binding verbal one can throw your campaign into a tailspin.

Once a contract offer has been made, its best that all competing offers are submitted on a contract as a sign of genuineness. Any buyer promising to pay more without signing a contract should be played cautiously.

Competition makes getting the sale easier; however, if you make the bidding process transparent, as in a public auction or Dutch auction, you can easily undersell. Competing bids must never be disclosed, as the buyers then focus on trying to beat the competition by $1000. Use competition and confidentiality to extract every genuine buyer’s highest offer in a short timeframe.

Non-price agreements: value for both parties can be created away from price. A potential agreement that adds value for both parties is worth exploring if it is close to being acceptable. Issues such as delayed (or early) settlement, release of deposit, leaseback, reduced deposit, inclusions or even some vendor finance on the difference can bring a negotiation together.

The more a real estate negotiation becomes about price, the less goodwill can be sustained. If you are horse trading on such matters, always remember to give a concession if you take one.

Pre-or post-due diligence: the pre-due diligence offer catches many sellers unawares. They accept the verbal or written offer and mistakenly think the property has sold. Suddenly the building inspection brings up a raft of issues that causes the buyer to reconsider, or the buyer’s bank values the property for 10 per cent less than the agreed amount, scuttling the deal. Any offer made prior to due diligence must be considered an expression of interest rather than a formal offer. Treat offers pre-due diligence seriously but cautiously.

There are no rules: there are no rules governing making, accepting or rejecting an offer. The property is not sold or purchased until contracts have been exchanged unconditionally. Its common for the seller to ask the agent, ‘How long do we have to consider the offer?’ an offer is an offer until the owner countersigns a buyer’s unconditional contract or the buyer withdraws from the negotiation.

It’s a mistake to think a buyer ill leave the offer on the table for a prolonged period while the owner chases a superior offer from another buyer. Complacency can bite during a negotiation, even in a boom.

Its worth noting that declining an offer does not guarantee that a higher offer will be made in the future. If you accept an offer, you will never know if your Alan Bond was going to turn up next week, so don’t think about it.

He toughest offer to accept is the one that is lower than the one you previously rejected.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Peter O’Malley

DO I NEED A GOOD REAL ESTATE LAWYER?

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

Many people scrutinise multiple real estate firms when selling but put up with 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, which usually occurs at the most crucial point of the transaction.

There are two errors people can fall into when appointing a professional to do their conveyancing. The first is they don’t know what to expect from a lawyer, so they look online until they find the cheapest one. Petrol and power are commodities that 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.

A real estate purchase is a long way from a corporate takeover. You don’t need to pay excessively for a competent 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 they hire someone who does not really want the job. Perhaps 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, even though they don’t really want it. In extreme cases, the file is passed off to paralegal or junior in the office and given little further consideration by the lawyer who was engaged by the loyal client.

Conveyancing is generally a straightforward process for a lawyer. But about one in 20 transactions requires the involvement of an attentive, competent lawyer when complications arise. Murphy’s Law ensures that the transaction delegated by the lawyer is the very one that will most require the lawyer’s skills.

If your preferred solicitor 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. Such candor ensures that during negotiations everyone will be on the same page and you wont be left floundering.

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 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, there is every possibility that multiple buyers will be trying to secure the property. Where you are buying or selling in such a situation, the agent and lawyer need to work closely together.

For the seller with multiple buyers in play its 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 their respective offers become binding upon acceptance. There is nothing worse then declining a contract offer for a higher non-binding offer that 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 return to the agent for setting up closure.

For a buyer trying to secure a property in a buoyant market, speed can often be crucial 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. They lawyer then provides authority to the vendor’s real estate agent and/or conveyancer to exchange contracts without a cooling-off period – pending agreement on price.

Presenting an unconditional contract offer to the vendor can often be the difference between your offer being accepted or declined.

A good real estate lawyer won’t be able to guarantee 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 and at a fair price.

A good real estate lawyer protects your legal interests without compromising your strategic position in negotiations.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Peter O’Malley

PEST AND BUILDING – SHOULD I GET ONE BEFORE I SELL MY PROPERTY?

When you are selling a home, if a potential buyer requests a pest and building inspection and the result of that inspection is poor, it can derail the sales campaign.

Genuine, unanticipated issues can be damaging. The buyer can conclude that crucial information has been withheld and the seller can feel as though the buyer is using a tactic to lower the price.

When selling your home, its best to get a detailed pest and building report done before listing on the open market. This will ensure that buyers cannot bluff you with a bogus issue mid-campaign. Conversely, if there is an issue that requires attention, you can rectify it prior to going on the market.

Buyers are understandably hyper-cautious when making a purchase. They are committing a large part of their wealth in a single transaction, and they have no doubt heard one too many real estate horror stories. Subconsciously, some buyers will often double the bad news and halve the good news.

A poor pest and building inspection report can cause the buyer to reduce their offer or even crash sale entirely.

Even if you choose not to rectify the issues, at least you are aware of them. The best way to handle defects is full disclosure to the buyer. If you allow buyers to discover negatives of their own accord, caution and distrust can build.

The law may state caveat emptor (buyer beware), but a more ethical, and savvier, approach for the seller is to declare openly, ‘these are the issues you should consider…’ full disclosure builds trust between seller, buyer and agent. It also avoids the need for messy renegotiations when the buyer discovers the negatives you may have attempted to hide.

Most buyers can accept defects and factor them into their offer, but if there is the slightest suggestion that issues have been withheld or smothered, most buyers will simply (and rightly) withdraw from negotiations or overplay the seriousness of the issues.

If you do decide to rectify a problem with pests – particularly termite infestation – make sure you know what the requirements are for your state.

Such work entails a mandatory sign-off certificate, so understand these rules and question any suppliers about their work – particularly in regard to newer homes – before spending money on what could be an ineffective job.

Honesty is the best policy when it comes to disclosing building defects or pest problems.

If there are any topics, questions or comments you would like to ask or make please email me on paul.wrigley@raywhite.com or call me on 4959 6577.

Paul Wrigley & Peter O’Malley