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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.

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.

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.

MARKET UPDATE July 2016

As the first half of 2016 is behind us, the comparison to the same period last year tells a vivid story about the local market right now, today. A knowledge of this comparison is essential for all Sellers.

Global factors and overall confidence being low, we have seen a fall away of sales volumes, quite dramatically.

Year to date (6 months) Applecross has had 63 sales (Down from 84 or 25% on last year) Mount Pleasant is a dramatic 45 sales down from 86 (48% down) on last year.

Applecross this year 108 compared to the same number last year 108 days to sell. Mount Pleasant 117 days to sell in 2016, up from 91 days in 2015.

The interesting figure I always look at is what I have called for years, "The two markets phenomenon", the days on market for the unsold stock. Two markets meaning, the half of listed properties that sell, and the other half that don’t.

  • Applecross- Days on market (based on 95 properties effective 29/6) is 291 (That’s right).
  • Mount Pleasant- Days on market (based on 71 properties effective 29/6) is 145 (Still a big number).

Many Sellers have been caught in a falling market, no doubt. Some areas have perhaps adjusted 5-10% in the past 6 months. Yet some properties still sell in days and weeks. Why is that? 

The good news!
If you are a genuine Buyer that is willing to engage good properties and pay a fair market value price there are many listings available and Seller’s that want to talk to you and release their properties to you

If you are a Seller, there are tried and true methods to work with this market, and agents that specialise in getting results in challenging markets.

It is correct to say, it is definitely not a one size fits all, and doing more of the same as a famous man by the name of Einstein said was “the definition of insanity”.

If you are looking to move, talk to me about how we can effectively price and position your property to stand out, in what is a tight Buyers’ market.

It can be disastrous to be stranded as one of the properties that misses the market. Talk to me about how we can avoid this.

I remain optimistic, buoyed and enthusiastic about the future local market. Much of our demand from Buyers comes from our existing database or local Buyers wanting to upsize, downsize or upgrade location within the City of Melville. Irrespective of global economic factors, there will always be this local demand.

REMEMBER: If you buy and sell in the same market, the market is negated and doesn’t really matter.

Thank you and see you in the market place.

Don’t be the first to walk away

In what is a tough, difficult period in the local property market where we continue to see large gaps in expectations between buyer and seller alike, the ability to get the deal together is often a case of how the negotiation is handled?

I have found recently several sales occur where the dates between first offer and final offer, for the same buyer was anywhere from 7-90 days.

The large gap in expectations is due to many factors.

1. Newspapers

2. Internet articles

3. Doomsayers predicting the sky falling

4. General fear and uncertainly

5. Global factors

6. Agent has not educated seller properly

7. Opportunism

8. Seller and/ or buyer with unreasonable expectations


Sometimes, early offers come in and the seller is yet to understand or accept the reality of the current market. Often, once the seller is certain that they are in fact dealing with what may indeed be “highest fair market value” in many cases sellers will do a deal with a genuine buyer, even though the offer may be lower than what is ideal.

Sometimes buyers might try on a low or cheeky initial offer, only to realise that a property they want might not be available at a certain level, so increase their offer as they realise that they need to pay more in some cases to get what they want. (Not all sellers will take any figure that is offered).

My advice in this market for buyers and sellers. - “Never be the first to walk away.”  Often, good agents need time to "nurse" the offer through as each side comes to terms with what is the actual situation. Rejecting an offer achieves nothing in most cases. I have sold properties to buyers that had offers "not accepted" only to represent and repackage them later in terms agreed by the seller. In other words, the sellers did not walk away first.

Buyers need to understand that many sellers may be “shocked” by some of the market feedback in relation to expectations and need some time to take all of that in, especially new listings. (Despite how much factual information the agent may have provided the seller).

Sellers need to understand that buyers will obviously be in this market empowered and in many cases do not fear prices going up in the short term, and will often try a lower offer to see how genuine the seller is. (Riskiest when the seller sets overly optimistic or aspirational prices).

I believe that if the initial asking price is about right on day one, the seller has the best real chance of a premium sales price as the buyers will know that the seller is very genuine, very serious and therefore will have some fear of loss. They usually then make their first offer a serious one.

Recently we sold 2 properties at the $1M market segment in 44 days and 32 days respectively. This was in my opinion due to, through appropriate motivation by the sellers and the right asking price strategy, caused by being able to communicate to the respective buyers that the sellers were very pragmatic, reasonable and motivated in relation to price. The buyers therefore had no reason to wait and procrastinate waiting for the price to come down.

Net result:

  • Buyers get a good property at a fair price.
  • Sellers get a result and can move on and at what I think it usually a higher price than the poorer cousins (other properties) that sit on the market 3 months to 2 years as some sellers are praying for better times past that are now gone.

Moral of the story, get it right the first time. Price right to sell, and you will. Buyers love it and sellers do to, as they get more and can actually move on. 

 

MARKET UPDATE June 2016

Things are still very tight, maybe even more so than any time this year so far. The pending Federal Election may have stalled some Buyer activity. We are still seeing a lot of traffic at opens, and are writing offers. Some offers are very optimistic by Buyers, who many appear to be trying to guess where they see the market going, and offering accordingly.

Other, more realistic Buyers whose offers are aligned with current market value are finding that many Sellers are delighted to release their properties to those Buyers and as such we see a sale being made.

We see a lot of listings being rested if they did not sell during the initial listing period, and expect to see many new listings reappear, as well as new stock never seen in the market before now. Irrespective of the market conditions, if you buy and sell at the same time, the theory is that the market is cancelled out (In most cases).

I also have another view about the market and timing. To date, very few have the skills and expertise to accurately and precisely time the market, especially post 2008, no one knows for certain what is around the corner.

My view with regards to owner occupiers and anyone that wants to live in the property, putting plans or your life on hold waiting for better markets could be a recipe for prolonged waiting as we may see holding patterns for some time to come (As we said no one knows).

In this market, Sellers need every competitive advantage with regards to strategy, energy, marketing and pricing to stand out and get the Buyers attention. Only then, can a likely result be achieved. Sometimes, sales are made to Buyers already on the Agents radar or database. We recently had a sale in 4 days to a Buyer that was on our radar and matched to the property (with 4 other offers) enabling the Seller to secure a satisfactory sale. This was less than 24 hours after appearing on the internet.

Buyers, have a few local agents that you are in touch with. The internet is in some cases, already too late for the best new listings. If you are a Seller please feel free to chat to me about taking advantage of the current market conditions, marketing and strategy ideas to get sold in a reasonable timeframe for the best price.

Thank you and see you in the market place.

MARKET UPDATE May 2016

I stated last month that the market remains tight (listing numbers and Sales volumes). In early May 2016, this is still unchanged.

The recent 0.25% basis points reduction in official interest rates is also welcome news for potential Buyers as well as existing mortgage holders on variable rates. The market can do with any positive news right now that is available.An impending announcement of a Federal Election is a good thing (probably 2nd July) as the market wants certainty, and to understand what if any changes may affect negative gearing, projected growth and so on.

Many Buyers right now are making offers way below current asking prices to “test the market” for urgency or what they feel is distress sales. You can’t blame Buyers for that. Maybe for old or stale listings that can be understandable. There is however no evidence of wholesale price crashes or markets falling, other than the normal slight variations that we have seen for many years now.

If new listings come onto the market priced according to the most recent current market data, there is no reason a property should not sell quickly and at close to the asking price. I have said for nearly 15 years now, not all sellers and agents over price the listings that they sell. I often ask the hypothetical question, if something is worth a dollar in today’s market, and you pay a dollar, have you paid too much?

My answer, of course not. I think too many Buyers pay attention to trying to get a huge discount off the asking price instead of trying to figure out what the current fair market value is.

Sellers that want to move will find that once the asking price is perceived as close to market value, serious and genuine Buyers engage that property and often a sale or deal can be made. In a tight Buyers’ market, properties perceived as not competitively priced, are often overlooked, rejected or subjected to more aggressive low offers.

Sellers always run the risk that new stock, priced at current market value are descended upon by Buyers that have been in the market a fair while, as often we see under offer or sold happen quickly on these listings as Buyers see them as good value.

If you are a Seller please feel free to chat to me about taking advantage of the current market conditions and get sold in a reasonable timeframe for the best price.

Thank you and see you in the market place.

MARKET UPDATE April 2016


The market remains tight. (Listing numbers and Sales volumes).

To highlight that:

  • In the first quarter 2015 in Applecross there were 46 sales. So far this year in 2016 the number is 35 (down 25%).
  • Mount Pleasant first quarter 2015 33 sales, so far in 2016 only 20 (down about 40%).
  • Average days on market in Applecross is now a staggering 291 for the unsold stock. To make more sense of it, (eliminating really long on market stock) the median days on market for unsold stock in Applecross is 170 (still a big number).
  • Mount Pleasant the numbers are 146 days average and 91 days median (for the unsold stock).

This phenomenon is what I call a constipated market. I have seen it before, and know how to successfully work with it. Many Sellers have been caught in a changing market. The good news is it is fixable.

If you are a Seller please feel free to chat to me about how to solve this current situation and move forward

That tells me that the market is sorting itself out with regards to the sentiment and what the future holds. Once buyers realise the sky has not fallen in, and basically the local economy is doing ok, that slack or lag should catch up.

The properties that are selling are the ones perceived as the best value. As always in a Buyers' market, it is about value.

Thank you and see you in the market place.

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