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The Risks of Overpricing

We see it all the time. Properties come onto the market, at what an agent or an owner thinks it is worth. An asking price or strategy is set.

SCENARIO ONE: The market thinks it is a little high; it sits there a long time. Either the price comes down, or worse, doesn't and as time rolls on the perception is that the property is overpriced. WHY? Hard to argue with the logic, “if it were good value it would have sold by now".

SCENARIO TWO: The agent presents a number of offers to the seller in the marketing campaign, often a "cluster" all around the same sort of figure and often less than what the expectations of the seller are, but appear to be at around "market value".

The seller may reject or counter them, and no sale occurs. Many months later the property ends up selling for far less than the early offers, sometimes with the first agent, often with a second agent. We see it all the time.

MYTH:
Many owners believe offers usually go up over time. In a rising market that may be true. In declining or flat markets, usually the opposite is true. Hence I recommend only coming into the market if;

  • You are definitely wanting to move and are committed to the process
  • Testing the market usually damages the value of a property. Serious buyers reject it, and soon the property develops a reputation among buyers and other agents as being "not really for sale".

There are enormous risks with coming onto the market too high, and due to the biggest fear of sellers, that being of underselling, the dice is rolled in an attempt to fetch a premium. That premium is almost always achieved in the period when the property is "fresh" to the market, and usually only if the initial asking price is an attractive level for buyers, who are looking for value.

Hence it is critical to get the following right as we do not get a second change of setting a first impression.

      I.            First class marketing is not negotiable. Every single quality branded product is accompanied by first class marketing, from a Mercedes, to a Rolex, to fashion. To do otherwise is false economy.

     II.            A professional expert agent to represent you

    III.            Quality staging and presentation if required to make your property stand out

    IV.            The correct pricing strategy appropriate for your property

     V.            A thorough understanding of "absorption rate" and "market segments" appropriate for your property

    VI.            Understanding of the "benchmarks" appropriate for your property

   VII.            An independent objective assessment about what the true current fair market value is

a.      That is not the same as an agent appraisal

b.      That is not the same as replacement value

c.       That is not the same as what you paid for it plus your costs

SOLUTION

       I.            Choose an agent like you would any professional lawyer, accountant or doctor, based on track record, references, trust, ability to deliver you the right outcome. In short appoint a master practitioner.

      II.            Determine yourself what the "real value" of the property is before coming onto the market

     III.            Appoint and take advice from your agent, trust that agent.  Work with them.

     IV.            Decide a strategy to make sure your property gets maximum exposure in the first 3-6 weeks. This is the critical period, in any market. All of the best buyers have seen your property by that time.

      V.            Be open minded to listen to what the market says about your property.

     VI.            Work with serious early offers, they might be the best you ever see. A well presented, well priced property should generate multiple offers (but not always) in the initial marketing period.

For an explanation of any of the terms above, please feel free to call me for a thorough assessment of your own property, or property information generally. 

Thank you and see you in the market place.

MARKET SNAPSHOT

MARKET SEGMENT: 
Many years ago I started using a term which I called "Market segment" in response to the recognition that the spread of price range in prestigious suburbs like Applecross, Mount Pleasant and Attadale was huge.

You could have properties for $400,000 right up to $10M plus.

So when buyers ask me things like, “What is the average price per sqm of land in Applecross” or I see reports of official data such as “the average days on market was 63 days”, sometimes I want to either laugh or scream.

The reality for me in the areas I work it is never the norm or the same as that reported as “average”. There is no sensible way to talk norms or averages in areas that has such a massive variation of properties and values. 

I divide Applecross into 10 segments, essentially to make some sense of what was happening simultaneously in the same suburb, depending on price. I measure days on market for unsold stock, sold stock, average and median values and days. It paints a vivid picture of contrast, and is fascinating to monitor and understand. 

All buyers and sellers must understand this concept to fully appreciate what is really happening in that respective market at that time. 

I often see some price categories (Market segments) take 300 plus days to sell, and sometimes we see properties on the market 3 or more years. 

ABSORPTION RATE: 
The simple explanation of this valuable concept is this. If a particular market can absorb 12 sales a year of a particular type/style of property, and there are 20 on the market right now, it would take 20 months for the market to absorb (Sell) all 20 without any changes to the market, or no new stock coming on.

In layman terms, the terms oversupply or under supply are a more general term for this phenomenon, whereas absorption rate is more quantifiable. 

This is very important to understand how many sales in your market segment have occurred in the past 6 months, and how many competing properties are on the market right now. 

DAYS ON MARKET: - How accurate is it?
We also see a huge manipulation of data, depending on who you listen to. There are many tricks to reduce days on market which make a lot of industry data inaccurate and even irrelevant.

Did you know?

A property listed with 3 agents for 100 days each, that changes agents as soon as the listing expires, and sells with agent number four in 3 days, is recorded as selling in 3 days. I regard that information as incorrect; the real figure is 303 days. 

ALSO, properties can be pulled up and down off the internet, or signs come off or up (At agent will) yet are never really off the market. You see them go up again with the same agent a week later as “new” online. That is manipulation of data and not accurate. We regard that as not a new listing at all. 

A property totally off the market for 60 days or more (Off all websites, sign down and out of the agent window) is considered off the market. 

“Coming soon” or “Market launch date”, is sometimes another way to try to create a perception of lower days on market. We record the very first date a property is ever seen in the market (Be it sign, internet with an address or not, or any print media, as launch date). 

If you would like a detailed explanation of any of these terms and how they relate to your specific property, and even more how it would affect your strategy, please drop me a line. 

New Year- New wave of buyers

Traditionally, New Year always means a fresh new impetus in the local property market.

Buyers and sellers alike set goals to move on, interstate transfers happen and people want to get the kids settled for the new school year.

Homes present well with the summer weather and generally people are more active.

I am particularly interested in recent years with the New Year, as I think a break from all the negative press of the previous year, is also a good thing. Also, people tend to look forward after Christmas, whereas there was a lot of crystal ball gazing and rear mirror reflection of the events of 2016 going on late last year.

2017 is no different. No doubt there are new buyers emerging, as is evident from the large enquiry over the Christmas break.

All in all, a great time for sellers to consider a move as there is good buyer activity, and often more new listings coming on for the buyers.

If you are looking for a move, contact the team at Evolution Realty and we would be delighted to assist you with your moving aspirations. 

MARKET UPDATE January 2017

The sales figures for 2016 are fascinating, even DRAMATIC. Despite what anyone says or thinks about the local real estate market, I expect to see big things in 2017.

The basics are still quite good. (Affordability, interest rates, unemployement still relatively low, housing supply). 

There is a definite trend of reduced volumes of sales, quite dramatically however, so this is not a time for sellers to be too bullish. There is undeniable evidence that changed market conditions, sentiment, tighter lending and a lack of price growth now for a long time (Many suburbs sitting at 2006/2007 prices), the Buyers know that they can wait for the right property at the right price. 

THE FACTS: (To illustrate I am using Applecross and Mount Pleasant only). 

Sales in past 5 years- APPLECROSS

2012- 180  (Days on market 164)
2013- 201  (Days on market 146)
2014- 174  (Days on market 109)
2015- 149  (Days on market 105)
2016- 138  (Days on market 132)

In other words, volumes down 32% on the peak of 2013 and 8% down on last year. (Source: Complete Data). 

Sales in past 5 years- MOUNT PLEASANT

2012- 159  (Days on market 162)
2013- 161  (Days on market 121)
2014- 183  (Days on market 100)
2015- 162  (Days on market 93)
2016- 112  (Days on market 111)

In other words, volumes down 39% on the peak of 2013 and 31% down on last year alone (Source: Complete Data). 

WHAT DOES IT ALL MEAN?

I am more excited than ever!- about the opportunity that 2017 presents, as we normally see new buyers and sellers alike jump into the market either now or early in the New Year anticipating a move.

Now more than ever getting the right agent is critical. 

The best agents make things happen, have energy and proactive systems in abundance. 

I expect big things in the New Year as the market settles back into a new kind of normal.

Buyers will buy, sellers can and will sell and everyone realises that the local property market is quite resilient and an excellent long term buy as far as value and lifestyle.

Please feel free to drop me a line to help you get moved in 2017.

The 5 Reasons Why a Home Does Not Sell

Reason 1) -The marketing is incomplete or ineffective. 
Not all real estate agents are alike and unfortunately, some do a minimal job in marketing the property once they’ve obtained the listing. 

I often research properties as part of my commitment to my craft. I’m frequently surprised by the number of incomplete property descriptions, lack of multiple attractive photos, and many times, just incorrect or incomplete information reported in the listing. In most situations, once a listing is entered onto the internet and the REIWA website it will appear on many sites on the internet, as well as the agents own sites and national real estate sites they may participate in. 

Those properties with limited information, or worse, just a few photos or unflattering photos are eliminated by buyers and their agents without the buyer ever setting foot on the property. There are three groups of people your property must appeal to: agents, local buyers and out-of-town buyers. All three are influenced by the computerized representation of your property. If your property’s online and printed marketing isn’t appealing, you will have no physical showings. 

While a very small percentage of homes are bought "sight unseen," the general rule is if the buyer doesn’t step inside your home, they won’t be buying it.

Reason 2) - The home shows poorly.
Let’s face it; your home has to compete with all the shiny model homes going up in every corner of the city. You are competing with professional decorators and landscapers who are experts at creating emotional appeal. These model homes don’t have real families living in them while being on the market. 

Thankfully, this is one of the easiest things to fix. A good cleaning, de-cluttering and cosmetic facelift is pretty inexpensive compared to the return in a higher sales price and faster sales time. Sparkling windows, kitchens and bathrooms, professionally cleaned carpets and fresh paint make a world of difference. 

Curb appeal from an attractively-maintained yard and an inviting front door doesn’t require a professional or large amounts of money.

Reason 3) - The property is in a bad location.
This is one thing that can’t be changed. A good real estate agent will be able to maximize the positive aspects of your property while trying to minimize the negatives. It may be possible to screen an adjacent property with landscaping either to lessen the visual impact or the sound impact of a busy street.

If your home is located in a less desirable school district or close to perceived nuisances, the best way to compensate is usually to reduce the sales price.

Reason 4) - The market is the market. 
It’s all based on supply and demand. All real estate markets are cyclical, sometimes hot, sometimes cold, and sometimes just in balance. They are affected by any number of things that you have no control over, such as interest rates, the economy, weather, national or local disasters, consumer confidence, and sometimes the time of year, such as the winter holidays.

If there are many buyers for a type of property and there is a limited supply, the market will be faster and sellers won’t need to pay as much attention to condition, marketing and proper pricing. If there is a large supply of inventory, with little buyer interest, homes will languish on the market and buyers will choose the best of the available inventory. 

That’s the time that paying attention to the items mentioned above makes a real difference in terms of how long it will take to sell your property and ultimately the price you’ll receive.

Reason 5) The home is overpriced.
I’ve seldom met an owner who doesn’t think his/her home is "better." I’ve been told many times about specific features that "should" make the home be worth more money than comparable homes. No matter how much you may appreciate your home and its particular special features, the buyers ultimately set the price by what they are willing to pay for the property. Overpricing, either by you or by an agent willing to suggest a higher price in order to obtain the listing, begins a chain of events that often works against you.

Real estate agents and qualified buyers currently in the market will see your listing within the first two to three weeks, and if it’s overpriced they will note that and move on to other properties. After those important first few weeks on the market, the only buyers who will see your property are those that are new to the market, and your property will be labelled as "overpriced." Buyers and their agents always look for "days on market" when searching the REIWA member website listings.  

Day-old bread, leftovers, and overstocks are always discounted. The longer your home is on the market, the lower the price you will eventually be offered. Every property will sell, if it is priced properly. I have said it all of my career, the way to get the highest price is to price the property correctly at current fair market value.

Thank you and see you in the market place.

MARKET UPDATE November 2016

The first quarter of 2016/2017 has seen sales start to move in various market segments, and an interesting picture unfolds. Applecross saw 36 sales (Up 15% from 31 on the year earlier same period) which averaged 193 days to sell (Median 89 days). That tells me a lot of the old or stale stock sold during the first quarter of the new financial year, is almost always due to pricing being adjusted either in asking prices, or sellers meeting the market in offers accepted and/or new buyers coming  into the market and seeing value. Either way, it is good to see sales numbers on the way up for this quarter.

Mount Pleasant the numbers are 33 this quarter compared to 40 the year before, taking 95 days (Median 42 days) to sell. A similar but less dramatic story around days on market for Mount Pleasant. 

Right now, stock numbers are a little low compared to this time of the year usually, this is a result of spring appearing about 6-8 weeks slow (Weather wise).We expect to see more stock and listing numbers to normalise soon. (20-30% more stock). This will have the effect of reducing average days on market which currently is quite high with Applecross approaching 300 days, Mount Pleasant 155 days and Attadale 190 days.

If I were a seller in this market, I would be doing the following 7 things to take advantage of current market conditions and get sold for the best outcome;

1)   Doing everything possible presentation wise to make my property look the best it has for the past 3 years (Show condition).

2)   Research  what  the  real  current  market  value  is  for  my  home  and  how  properties  in  my  market segment are performing and have performed.

3)   Invest real money into a first class marketing campaign (If $5,000 invested made you $25,000 more that would be one of the smartest return on investment going around right now).

4)   Price my property at market value to market value plus 3% maximum. I would in all likelihood strongly consider no price for the first 21 days.

5)   I would look hard at all written offers that were “close” to what I wanted and do a deal with one of those.

6)   I would select the most proactive, proven, energetic agent I could find.

7)   I would work with that agent, trust them and follow their advice to get sold.

As always, please feel free to contact me with regards the market and how to get sold.

Thank you and see you in the market place.

MARKET UPDATE October 2016


Spring has come late in 2016, with early October still with a winter feel about it.

As soon as the cooler, wetter months subside traditionally spring represents a more buoyant and positive lift in local real estate markets.

More stocks to come on, more buyers are out and about, and a generally more upbeat disposition overall. We expect this year will be the same.

Right now, Applecross has 81 listings which are now up to 302 days average (median 171) on the market and Mount Pleasant has 70 properties 
on the market which are now up to 159 

days on the market average (75 days median). Stock numbers are down too about 15-20% in listing numbers.

This tells me that three things have occurred.
1) The sellable/best value properties have been sold

2) Many properties have been rested (unsold) where sellers are contemplating a new launch in spring. Watch for some more listing numbers

3) The properties priced optimistically have remained unsold as buyers continue to seek value.

We are also noticing finance from the banks is very tight, with examples of some properties coming back onto the market due to finance declines, as well as extensions being sought by brokers/banks for some finance applications as the lending criteria tightens.We see buyers prepared to engage the market and make offers where they see properties that broadly meet their criteria.

Buyer activity continues to be bold with many offers coming in way below expectations. This is quite normal as some buyers are looking for perceived distress sales or windfall opportunities.

Mostly, the sales that occur are in line with market value and we remain confident that the remainder of 2016 will be strong, in sales volumes and buyer activity.

Thank you and see you in the market place.

Ten Important Questions for Sellers

Please find below ten of the most important questions that should be considered when selling your home. Before you select an agent, it may be a good idea to have an agenda to help provide the meeting with structure and determine the most suitable agent for you. After all if you don’t have the best agent representing you, you can’t expect the best results.

1) REPUTATION: What do others say about the Agency and the sales consultant? What is the agent known for? Are they reachable? Would they cut corners to make a deal? Can you trust them with your house keys?

2) TRACK RECORD: How many sales have the sales agent made in the past 3 months, 6 months, 12 months and 5 years? You need your sales agent to be active in the current market. Sales made in years gone by do not qualify your agent to represent you in today’s market unless they are still highly active. Is the agent proven as a success over a sustained period?

3) CREDIBILITY: How many properties have the agent sold locally in the past 1-5 years? Where have they sold them? What type of properties? What do their clients say? Does the agent have written references?

4) SKILLS: What is the sales agent’s ‘Average Days on Market’? Can they close? How is their marketing skills and acumen?

5) APPROACH: How will buyers be found? How will the highest price be achieved? Does the agent understand the different types of buyers and how to achieve “Buyers highest price”.

6) AGENCY: Is the agency an active member of REIWA? What is the office/ agent personal conjunction policy?

7) SERVICE: How many written testimonials can the agent show dated in the past 12 months from satisfied clients? Do they show them on their website? (Check ours if you like).

8) RESOURCES: What are the internet capabilities of the agency? How many registered buyers does the agent have right now for the property? IS their website fast to load, attractive to buyers, easy to find?

9) RISK REVERSAL/ PEACE OF MIND: If you are not totally satisfied with the service, are you “stuck” with the agent or can you be released without penalty to appoint another agent? 

10) PROFESSIONAL AND ONGOING DEVELOPMENT: What professional training seminars has the agent attended in the past 12 months and what ongoing professional development have they undertaken to keep abreast on industry leading trends and techniques?

MARKET UPDATE September 2016

 


We see stock numbers down a little at the moment with a flurry of sales, and some early signs of equilibrium returning in the market, albeit still being tight and price sensitive. Buyers want value.

We are seeing interesting times in the local market right now, and we are selling plenty and adapting in these interesting market conditions.

The tried and tested wisdom is that the properties perceived as good value, presented well and with realistic sellers will sell, and as we have seen, many have been.We are seeing some bold, often aggressive activity and behaviour from some buyers, who some feel low SMS text offers are now the new norm. (Or aggressive verbal offers testing the agent, or extremely lowball offers). Also, some buyers trying to crystal ball gaze where they think the market is going and offering according to that.

Despite it being a buyer’s market, it isn't all the buyers way right now though. The best properties still attract top interest. Some properties sell for prices which end up with a spread of offers and interest as much as 20% apart. One sold last week where in the space of a week, 5 offers were presented and over 50 buyers viewed the home in the space of a month.  Many of our listings attract offers resulting in a sale in the first week on the market, proving the resilience of the local market, and certainly evidence no wholesale capitulation is occurring (despite the hype).

For buyers, once you have the right property, to get that property at the right price but in a way that the seller doesn't lose interest or interpret the offer as not serious, even offensive, it is important to have your finances in order beforehand, and to make a fair offer at market value. All serious sellers love talking to and dealing with the serious buyers.So for sellers, it is about finding the right buyer, as only one buyer can actually buy the property.

Especially in this market, properties should ideally be no more than 3-5% variable in the price between market value and asking price. If the gap is too large, there is a risk that the genuine buyers will reject it as "not really for sale" .

Choosing an effective strategy that allows a suitable way to discover the right highest market value in this market is critical. We at Evolution specialise in customised and effective marketing strategies, feel free to talk to us about it.

Thank you and see you in the market place.

The Importance of Price in a Tight Buyers Market

The market is very price sensitive at the moment.

Time and time again we see properties sit stagnant whilst the buyers grapple with getting the best value they can find. When a property is priced 10% or more above what buyers think is fair market value, usually the property will not only not attract offers, but probably the wrong buyers are viewing the property.

As soon as the price is adjusted to within 5-7% of current fair market value, some interest starts to firm up, and we find that when the figure is 3-5% several offers usually occur and buyers emerge.

Typically, when a property is on the market longer than 6 weeks, or has had more than 12 inspections and no offers, this could be a sign that the asking price is too high.

Even slight adjustments to an asking price can have a positive effect.  (Psychologically, the first 2 numbers are all the buyer looks at), hence $995,000 appears $100,000 less than $1,000,000.

Thank you and see you in the market place.

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