Auctions Get Lower Prices – Peter Lees

Homesellers tempted to auction their homes should remember 4 words AUCTIONS GET LOWER PRICES. Never mind what you read in the papers, auctions are a financial minefield for consumers. Despite the booms in many areas, thousands of home sellers are turning their backs on auctions and benefitting. But there area still thousands of sellers who don’t realize, until it’s too late, what happens to them at auction. They get a LOWER price, that’s what happens. If someone is trying to talk you into selling by auction, then before you sign anything, please read this.

NINE REASONS AUCTIONS

GET LOWER PRICES

1.     THE STARTING PRICE

It seems as if the price goes up at auctions. But that’s only because it starts LOW. It’s like starting the day with a massive hangover and saying that you are going to feel better as the day progresses. That’s not a good reason to get drunk every night. Avoid drinking and avoid the hangover. You start the day in good shape.

2.     RESERVE PRICE

The reserve price is the price at which the home can be sold. It’s the lowest price a seller is prepared to accept and that becomes the central focus of the auction. If you are trying to get the highest price, do NOT make your lowest price the main focus of the sale.

3.     REPELS BUYERS

Research shows that more than 90 percent of buyers do NOT like actions. It makes no sense to use a system of selling disliked by most buyers

4.     INCONVENIENT

One of the BASIC rules of marketing is: make it EASY for people to buy. Auctions do not make it easy. They make it hard. Many buyers see that a home is for auction, and if the date doesn’t suit them, they don’t even bother to enquire. The buyers that are lost in this manner are often buyers who would have paid thousands of dollars more than the auctions final selling price.

5.     BARGAIN HUNTERS

Investors, property dealers and bargain hunters all know that auctions are one of the best places to find cheap deals in real estate. It is well-known that deceased estates and mortgagee sales are often sold for a “song” at auctions. Auction agents try to justify this by saying, “look at the banks and government departments. They use auctions.” But sale is more important than price.

6. COMPARATIVE

If two or more people want to buy the same home, the worst thing you can do, from a negotiation point, is to allow each person to SEE what the other is offering! Instead of offering their highest price, each buyer will only offer a SMALL amount above what the other buyer offered.

7. DECEPTION

To persuade sellers to auction their homes, agents will talk about high prices and then to get buyers to come to the auctions the same agent will talk about low prices. Most times both the seller AND the buyer are deceived. The sellers end up selling for less than they were told they could get, and the buyers often end up paying more than they were told they could pay.

8. SELLS TO THE WRONG MARKET

To attract buyers, agents will market the home by advertising it to “start from” a low price. This is supposed to attract buyers and indeed it does. But it attracts the wrong buyers who want to buy at the LOW price NOT at the price the seller wants. Many of these buyers cant afford to pay much more than the price advertised and so on the day of the auction, there will be a crowd of buyers all wanting to buy at a low price.

9. FAILED AUCTIONS

When a home does not sell at auction – and thousands don’t – it is labeled a “failure’. Buyers think something is wrong with it; and many will offer LOWER prices. Like a wounded animal with vultures circling, failed auctions are easy prey for bargain hunters.

Is Now A Good Time to Buy Property? By Paul Kounnas

Like most people, you're probably confused by the daily bombardment of mixed messages about the state of the property market.

Are you finding it difficult to make sense of the conflicting information?

Well don't. The market is going through a transitional period where some properties will remain stagnant, others will rise and some will fall.

There are no apparent signs of home sellers so desperate to sell that they would give away their properties at a 30% discount, which would then trigger a collapse in the housing market. In Australia there are less than 1% of mortgages in arrears, which is considered low by international standards.

We are also currently seeing the signs that the market is beginning to stabilise after the slowdown we experianced during the past twelve months.

Paul Bloxham, HSBC's Chief economist for Australia and New Zealand, and a former RBA economist, believes that the prospects for the Australian economy are strong. Paul Expects house prices to "track sideways' in the short term and then rise in line wth household disposable income - we expect that housing prices will continue to grow at a modest pace over the next few years. We view the risk of a sharp fall in housing prices as very low."

This is a year of opportunity for the astute property investors, who can see through the maze of mixed messages. They will do very well as they take advantage of long term opportunities presented by the current market.

If you a selling and buying in the same market this is a good time, particularly if you are upsizing.

Can you remember back 10 years ago? How cheap were properties then?

Don't be the one looking back in a few years time saying "I wish I bought back in 2012 when property was cheap."

Old Versus New by David Kerr

If there's one topic property investors rarely agree on, it's what makes a better investment: old or new?
Proponents of buying 'old' argue that established dwellings are typically more affordable and can be renovated to create equity, whereas those buying 'new' argue that this is outperformed by the tax incentives that new properties deliver.

Confused? Here are the arguments for both sides of debate, but remember there is no right or wrong answer, regardless of which corner you stand on! Old and new properties both have distinct, unique advantages and what counts as an investor is that your decision matches your individual strategy and goals.

Reasons to buy New
1. Tax Depreciation
If you're an investor, one of the big advantages of buying a newly constructed property is that you can claim depreciation as a tax-deductible expense. This includes the depreciation assets in the buildings and the cost of the building itself, as well as wear and tear on fixtures and fittings in the property. The newer the property, the higher level of depreciation.

2. Better Quality Tenant
Brand new properties tend to attract a better quality tenant, which means a higher rental income and fewer headaches for the landlord!

3. Less Maintenance
Unlike new homes that require little maintenance, owners of second hand properties are often faced with immediate maintenance issues. The cost of repair in older homes can significantly inflate ongoing expenses.

4. Warranty
As a purchaser of a new property you are protected for a number of years against major building defects by home warranty insurance, which all builders of new homes in Australia are required to carry.

Reasons to buy Old
1. Equity
There is little opportunity to add value to a new home, whereas the investment made in an old home can grow in the future should you choose to renovate or extend.

2. Affordable
It's often said that you get more house for less dollars buying a secondhand home than when buying a new one. For entry level investors, old properties can have the advantage of an affordable price tag.

3. Unique Appeal
Older homes often have great features that can't be replicated in new homes. A well maintained period - style home, for example, will reap rewards in capital growth down the track.

4. Established Sales History
There's little guesswork in buying an established property because you'll be able to trace back the property's appreciation and find out how the suburb has preformed. This can help give you the assurance you need that you're buying a good property.

Eight Silly Excuses

Don’t chase the market down.

by Neil Jenman 

Something terrible is happening to a lot of agents. They’re not making sales. Real estate salespeople are starting to go weeks, even months, without a commission cheque.

But if it’s bad for agents, it’s also bad for the people who traditionally pay the agents – the property sellers. Tens of thousands of properties are languishing unsold. No one wants to buy them. Or, at least that’s how it seems.

What should sellers do in today’s depressed market? How do they still get a good selling price?

Some sellers are just taking their properties off the market. They’ve given up; thrown their hands in the air. They’ll wait until the market gets better which assumes, of course, that it does get better. Well, it always has – hasn’t it?

There’s no way that Australia can go the way of America where property prices have fallen by tens, even hundreds of thousands of dollars. In some parts of America, properties that once sold for $600,000 are now selling for less than one hundred thousand.  In almost every country in the world real estate prices are well down. And, even if The Economist says that Australia’s prices are among the most over-inflated in the world and we are due for price falls of at least 25 per cent, it’s not really going to happen. Is it? Let’s hope not.

The reports that Australia is in a worse position than the US market was just prior to the GFC are just designed to scare us.

Still, if you’ve got your property for sale at the moment, you’ve got some serious thinking to do if you really do intend to sell. You need to make sure that you get the best possible price for your property. In order to get the best price, however, there are some things you must understand. One of the hallmarks of successful people is their ability to find and see reality. They don’t make decisions based on fantasy. They get the facts and then they act.

The most important fact – the reality – in today’s real estate market is that prices are depressed. Prices have fallen. The price you could have got yesterday is more than the price you can get today.

But, on the good side, the price you can get today is almost certainly more than you will get tomorrow. The most powerful (and worrying) aspect of today’s property market is that, despite, the Reserve Bank lowering rates recently, prices have kept falling; indeed, they’ve got worse.

When it comes to real estate, we’ve all heard that the three most important points with property is location, location, location. Not anymore. In today’s market, the three most important points are price, price, price.

There are many reasons (excuses) you can tell yourself for why your property is not selling, for why it’s being rejected by buyers (and if agents say there are “no buyers around” don’t believe them. If you cut the price of your property in half, there’d be a stampede of buyers.).

The number one reason that your property will or will not sell in today’s market is the price. Here’s the most realistic and solid fact in today’s property market for sellers who can’t understand why their properties are not selling – four words: The price is wrong.

This should be the first point that sellers understand. Sadly, it’s often the last point that sellers realise – and, by then, they can be tens of thousands of dollars worse off. A falling property market – which describes today’s market – is a dangerous time to sell.

Rather than face the reality – the price is wrong – sellers, and to their shame, some agents, trot out eight common excuses to explain why the property is not selling. Here they are. And, if you or your agent have been using any of these excuses, pay close attention. You could save yourself a stack of money, at least tens of thousands of dollars.

First Excuse: PHOTOS. “The photos of our home are not good enough. Yes, go and have a look on Domain dot com. your property doesn’t look good enough. You’d better get a professional photographer.” This is an absurd excuse. Photos never sell a property. Indeed there’s strong evidence to suggest that the better the photo, the less likely the buyers will buy. Why? Because photos – especially those done by a professional at a cost of several hundred dollar – make the property look better than it really is. They distort reality. The buyers see the photos and get excited. And then they see the reality and get depressed. Some even get angry. They feel that the photos were misleading.

Second Excuse: MORE WEBSITES. “Oh, and you’re only on Real Estate dot com. You need to be on domain dot com as well. Haven’t you seen that ad with the jogger who runs into a glass wall, thereby signifying that if your property is not on domain dot com, it’s invisible?”

This is an absurd excuse because buyers visit more than one site. If you spread yourself across all the available websites, you’ll simply be adding money to the coffers of the website.

Third Excuse: MORE ADVERTISING. “And what about the marketing campaign? Is your property being advertised in the major newspapers, the ones with hundreds of thousands (even millions?) of readers? How can you expect to sell if people don’t see your home for sale? What about the local paper? Shouldn’t your property be advertised locally?”

This is another absurd excuse.

You can send yourself broke with print advertising. Indeed, many sellers literally run out of cash to advertise their properties. Don’t pay a thousand dollars or more for an advertisement that lasts no more than seven days. For a couple of hundred dollars you can be on the Internet virtually forever. If you think that lack of marketing is a reason your property is not selling, you’re almost certainly wrong. The reality is that, if your property is for sale, at the right price, buyers will find you.

Fourth Excuse: OPEN INSPECTIONS. “What about some open-for-inspections? If you’re not doing any, start doing some. If you’re doing some, do more. The more you have your property open for inspection, the more buyers you’ll find.” Wrong.

This is just another absurd excuse.

You don’t need hordes of unqualified strangers wandering through your home. Every hour that an agent wastes at an open-for-inspection is an hour the agent could spend productively back at the office searching enquiry logs, card boxes, computer lists and a horde of good sources where the right buyers can be found.

Fifth Excuse: FLOOR PLAN. “What about a floor plan? Surely that’ll attract buyers.” No it won’t. This is another absurd excuse. In many cases (probably more than less) when buyers look at a floor plan, they make a decision that the home is too small. Qualified buyers need to see your home in the flesh not with a floor plan.

Sixth Excuse: STAGING. “How about spending a few hundred dollars (or even up to about $5,000) by getting a professional ‘staging’ company to tell you how to set up your home. Maybe you can hire furniture and set up the home so that it appeals ‘psychologically’ to the buyers?” Oh, please! Is this the worst excuses yet?

Seventh Excuse: WRONG TIME. “Oh, it’s just the wrong time, that’s all. The real estate market basically shuts down in December and January.” What baloney. Some of the agents shut down, but the market never shuts down. Ask any of the hard-working and sensible agents and they’ll often tell you that December is their best month. Why? Because most of their competitors just give up, which means that smart agents get ALL the business that’s around.

Eighth Excuse: WRONG AGENT. “If your property is not selling, there can only be two reasons: the price is too high or the agent is no good.” It’s easier just to blame the agent and label him or her with an incompetent badge. The other agents are openly saying that if they’d had your property for sale, it would have sold by now.

What an absurd excuse.

If there is one person who wants (no, needs!) to sell your property as much as you do, it’s the agent. If the agent doesn’t make sales, the agent doesn’t eat. Granted, some agents are better than others, especially when it comes to negotiating the best price for you. Changing agents usually only leads to a sale if the price is changed too.
 

REALITY

The number one reason why a property sells or not can be found in one five-letter-word - PRICE. This is a reality that both you and your agent desperately need to face. In a depressed market, every day you delay costs you more money. If your property does not sell in the first two weeks of it being on the market, you are almost certainly asking for an unrealistic price.

Don’t make the mistake of ‘waiting for your price’. When the market is going down, waiting just costs you money, big money.

These days, buyers are not as stupid as they used to be. In the digital age, buyers can get information that tells them what to pay. They can look at the price of every property that has sold in your street. In an instant, they can see every property for sale in your area. If your price is too high, the buyers will know it in seconds.

Please don’t get caught in what should be called ‘Delay Damage’. The longer your property is on the market for sale, the lower the price you will get. Buyers think alike. If a property has been for sale for more than a month, the buyers are going to have one of two thoughts about it: first, there is something wrong with it. Or, second, the price is too high.

Unless you really do have to sell, maybe you should not be selling in a depressed market. But, then, if you are selling and buying again, what you seem to sacrifice on the sale, you’ll soon make up on your purchase.

The worst thing that you can do if you’re selling in a depressed market is to ‘chase the market down’.

Let’s say you put your property for sale at a million dollars when it should be for sale at $950,000. When you realise you’re in trouble (the way you know if you are in trouble is when no one buys your property in the first two weeks of it being offered for sale) you may decide to change your asking price to $950,000. Too late. The market has now fallen to $900,000. And then, a few weeks later, you say, “Oh well, now we realise it. Okay, we’ll accept $900,000, that’ll be our new price.” Too late. The market is now at, say, around $880,000. What are you doing? You’re slashing thousands off your own price because you are chasing the market down.

Don’t chase a market. Catch a market.

That’s right, instead of lowering the asking price after the market has fallen which almost certainly means that you will be chasing the market down, you should set a better than realistic asking price in the beginning. Catch the buyers with a true and honest price. Your lowest price – to start.

Let’s take the same example again. Instead of listing your property at a million dollars, list it at $950,000. If you immediately get a buyer, you know that you have done well. If you’re clever, you can set a catch price of, say, $900,000 in which case you are quite likely to get two (or even more) buyers interested at the same time. Then, you simply ask each buyer to give you, in writing and in confidence, the highest they are prepared to pay and, presto, the price will climb up, often to well over the ‘catch price’.

To be smart in a depressed market, you’ve got to be tough on yourself. If you’re not tough on yourself to start with, then the market is going to be a lot tougher on you later on. Have a real heart-to-heart with an agent that you trust (if you don’t trust your agent, you’re in big trouble) and work out what is the absolute rock-bottom price that you can afford to sell for. Please note, the price that you can afford to sell for, is going to be much less than what you want. In a down market, the market does not care what you want. It only cares about a realistic sale price.

So, know your absolute rock bottom before you begin to find the best buyer. To catch the market (instead of chasing it), promote your rock bottom price with the words “or offers above”. This is signifying that your price is so good and so attractive that a lower offer is unthinkable. You have been realistic with your catch price and you now ask the buyers to be realistic with the most they are prepared to pay you.

Remember, of course, that your ‘catch price’ must be genuine. If that’s the absolute best that you get offered, then you are going to have to sell at that price. But, whether or not you like the price, at least it will mean that you have sold – and you can get on with your life.

In a depressed market, such as today’s market, don’t swallow any lame excuses about why your property has not sold. It’s the price, always the price. Set a price that’s going to catch the buyers. You’re in competition with a stack of other sellers. Make sure that your property is attractive. To be attractive, it means you have to set the right price right now.

Get the best price and get out of the market – fast.