Wednesday, 25 October 2017

Do you need an agent to sell your property?

Today most real estate agents only meet the minimum educational requirement of approximately six weeks basic training to get their salespersons certificate here in NZ.  There is a requirement for them do an additional 20 hours training per annum however this is very simple and at secondary school level.

In most cases the real estate agents main job once they have secured the vendors listing is to just close the gap between the vendor’s expectations and what the buyers in the market are prepared to pay for their property.  Apart from being the go between with the sales and purchase agreement and manning the open homes they don’t do a lot to earn that hefty commission fee.

It is generally accepted that agents spend more time with the smoke and mirrors of self-promotion trying to get listings than they do selling properties.  The reality is there is nothing they can legally say or do when dealing with a potential buyer to make them pay more than the buyer is willing to pay for the vendor’s property.  

What an agent could do to help a vendor achieve a better sale price for their property is to show them how to make it more appealing to a broader section of the market.  Not many agents will have this ability and it is not something they are trained to do.  An astute vendor could already be aware of what is required to make their property more appealing.

The truth to being successful in real estate sales is about being charming, good at selling one self and not being phased by rejection.  Successful agents are usually very good at getting vendors to list their property with them and their agency.  They will often have a large network of contacts via organisations like church or sports groups and these contacts will generally like and trust them.  Once they have made a few sales they can then embark on some serious self-promotion within the geographical area they want to concentrate on.

This self-promotion can range from building brand awareness by having signage in and around a location the agent and agency wants to concentrate on, to flushing out potential vendors with offers of free appraisals.  It’s not just the sign on the property that helps build agent and agency brand awareness.  Those directional arrows you see out over the weekend are also about building agent and agency brand awareness.  Buyers don’t need those to find an open home these days with google maps etc.   

Some New Zealand agents are following their overseas counter parts and starting to invest their own money into self-promotion putting their names and faces on the back of buses and bus shelters etc.

The print advertising you see in the print media in the weekends is as much about brand awareness for the agent and agencies as it is about promoting the vendor’s property to potential buyers. 
Some agencies reward agents with awards for getting more vendor paid marketing (VPM) than their colleagues and large portions of this ends up in print advertising.

It’s all about being good at listing real estate to sell and having what they call in the real estate business “a motivated vendor”.  Motivated vendors are gold for real estate agents.  They are people who for one reason or another must sell.  They are not just people who will sell if the price is right.

Often in real estate training they will talk about the three Ds.  Death, Divorce and De-bank.  If the vendor has been through a divorce, is under pressure from the bank or there has been the death of the owner or part owner of a property, they can be almost certain of a sale and a commission from a 90-day sole agency.  

People who are thinking about selling their property will often peruse the real estate section of the paper and become more aware of the various real estate agents and agencies operating in the location of their property.  This print adverting adds to the brand awareness putting those agents and agencies on potential vendors shopping list when they finally decide to call in some agents for that all important appraisal.

Being called in for an appraisal is the same as making the short list for a job interview.  It then comes down to who builds a relationship and wows the vendor during the meeting at the vendor’s home where they present the vendor with the appraisal and often a marketing package. 

The appraisal figure will also make a difference to the vendor’s decision so agents may make this a bit on the high side which is known in the business as “buying the listing”.   It’s unlikely to be deliberately low as agents know this will see them cut from the short list immediately.  Vendors perceive a low appraisal figure as an attempt by an agent to get an easy sale at a low sale price.

On a rising market a slightly high appraisal figures will not be difficult to achieve however on a flat or declining market this could be a problem and agents will then have to condition the vendor’s expectation’s down to achieve a sale.

 That data base that some agents claim to have is the same group of people who are searching the various property websites for a property that meets their needs. They are the same buyers every agent has on their data base.  Real buyers are proactive and search online for a property that will meet their requirements and have no loyalty to any one agent.  If they see a property they like they will simply go for it, even if it’s a private sale.

The best thing a vendor can do to sell their property is to have it well presented, use high quality promotional material in places where real buyers search for property.  These days in NZ Trademe property is the go to property website.    

At the end of the day a property is just like any other product and the four Ps of the marketing mix (Product, Price, Promotion, and Place) apply along similar lines as they would to any other product in the market place.  Getting the marketing mix right is important and the most important part of that is the actual product itself.  Make sure the property is well presented and this can involve everything from weeding the gardens to staging the inside with nice new furniture from one of the many companies that specializes in staging property for sale.

High quality digital marketing is very cost effective these days.  Most properties sell themselves based on their location and presentation.  As previously mentioned there is nothing an agent can legally say or do to get a buyer to pay more for a vendor’s property than they are prepared to pay.

Agents in Auckland are frequently advocating vendors use auction as the best way to sell their property.  This can be highly effective during a buoyant market and it is true that some competition can drive the sale price up. 

During a flat or declining market having no bidders or just one bidder showing up for the auction puts the vendor at a serious disadvantage when it comes to negotiating the sale.  Agents play this scenario down and make claims of being great negotiators however there is no significant benefit for an agent to get the vendor and extra $50,000 versus a quick sale so one must question their motives at the end of the day.

Some real estate agencies pay agents a bigger slice of the commission if they convince vendors to take their property to auction so it’s the best method for them and for the agencies a high volume of turnover is also better.

The selling price of property is generally driven by supply and demand.  Apart from putting together marketing packages and being a go between buyers and seller’s agents only manage vendors price expectation and that is usually downwards to meet the market.  In general, if vendors didn’t have an over inflated opinion of the value of their property, there would probably be no need for real estate agents.

Saturday, 15 April 2017

Not the Most Liveable City in the World

The goal of making Auckland the most liveable city in the world has been subject to a significant setback. This has been due to a population growth that has not been planned or adequately accommodated.

The city has become unaffordable for many average wage and salary earners like teachers who now prefer to work virtually anywhere but Auckland city.  The high cost of accommodation and the impossible traffic is the main reason for this fact.

The New Zealand government were very happy for the economic gains from the 70,000 migrants annually moving into New Zealand over the last few years. The majority have decided to settle in Auckland however the housing and infrastructure needed to accommodate the population growth has not been provided.

While those who owned property in Auckland since 2012 may be happy to have seen their property go up in value exponentially, that win fall has come at a cost.

The city now has some beaches that are permanently polluted due to an antiquated stormwater and sewer system put under pressure from population growth.  Some older dwellings have not had their storm water and sewer systems separated so raw sewage is still being discharged into these beaches from these older dwellings.

The traffic problem is something everyone in the city must endure as trying to get around the place is simply a night mare during rush hours.  The problem is compounded by road works that are in a catch-up mode trying to add lanes to an inadequate motorway system.


The public transport is less than average with bus lanes, cycle lanes and T3 lanes (cars with 3 occupants) mostly empty during rush hour and possibly adding to the problem as there is only one lane for regular traffic during rush hours.

There is plenty of evidence that Auckland city is not an ideal place to live and if it wasn’t for the need to live there for employment and family connections, people would rather live elsewhere.

2015 was the year capital gains were well over 20%, 2016 the year the average property price went up 12.2% and in 2017 they are expected to be sub 10%.  Yields on most Auckland investment properties are well below 3% and interest rates are heading up.  This would suggest that Auckland city is no longer the ideal place to buy investment property.   



  

Tuesday, 4 April 2017

Container homes have been around for several decades and there have been some stunning homes built out of the humble but sturdy shipping container.  The examples and information available on container home could easily full several books.

One of the most impressive I have seen pictured below was on the TV series Grand Designs UK.  This was a master class on container home design and considering the quality of the fit out it came in at a modest 1000 English pounds per m2.



There are companies here in Auckland that are doing shipping container fit outs and they are coming at costs of about $2000/m2 inclusive of the container. 

There is a movement advocating the use of old containers however the savings are minimal over a new container and they look rather shabby compared to a new container which embraces an industrial look if left in its raw state on the outside.


The focus of this blog is the ability locate and relocate a 20 foot x 8 foot HC (6m x 2.4 m) container on to one’s section as a rental income stream. 
As can be seen from the adjacent picture there is adequate room inside the 20 footer for an ensuite, kitchenette and queen size bed.

There will still be a requirement for building consent and a need to connect the container to local utility services.  AirBNB could be an option along with people who are here on working visas doing their OE from Europe.

There is also a big demand for student accommodation not just for university but also secondary school. Obviously secondary school students would require a higher level of adult care.  A 20% gross return on your investment would not be an unreasonable expectation depending on the location of the property.  That’s allowing $50K for the container connected to services and furnished with a very modest rental of $200/week $10,000pa.  The other end of the scale could be a gross yield of close to 33% or $15,000pa.